What is Prop 33 and Why It’s a Threat to California’s Rental Housing Market

As California voters head to the polls in November 2024, one of the most significant measures on the ballot is Proposition 33. This controversial proposition aims to repeal the Costa-Hawkins Rental Housing Act, a state law that has provided vital protections against extreme rent control since 1995.

For property owners, real estate investors, and tenants alike, the outcome of this vote will have far-reaching consequences for the rental housing market in California. But what exactly is Prop 33, and why should you care? In this post, we’ll explore what’s at stake if Prop 33 passes, and why it’s crucial to vote NO this November.

Understanding the Costa-Hawkins Rental Housing Act

The Costa-Hawkins Rental Housing Act was enacted in 1995 to provide a framework that limits the extent of rent control in California. Here’s what Costa-Hawkins does:

– Exemptions for certain properties: Single-family homes and apartments built after February 1995 are exempt from rent control under the current law.

– Limits to rent control expansion: Cities that had rent control ordinances prior to 1995 cannot impose rent control on any apartments built after the date of the local law.

– Vacancy decontrol: This means that once a tenant moves out, property owners can adjust the rent to current market rates for the next tenant.

These safeguards have helped maintain a balanced approach to rental housing in the state, allowing property owners to earn fair returns on their investments while also providing reasonable rent control protections for tenants.

What Prop 33 Would Change

Proposition 33 seeks to repeal Costa-Hawkins entirely, opening the door to strict rent control policies across California. If passed, Prop 33 would allow local governments to impose price controls on single-family homes and apartments, regardless of when they were built. This could also mean that even newly constructed properties could be subject to rent control.

Additionally, Prop 33 would allow for the return of vacancy control* meaning that rents would no longer reset to market rates when a tenant vacates. This would severely limit a property owner’s ability to adjust rent, even when costs for maintenance, taxes, and improvements rise.

Why Prop 33 is a Threat to California’s Rental Housing Market

If Prop 33 passes, it could drastically alter the landscape of California’s rental market. Here are the key reasons why:

  1. Expansion of Rent Control to All Housing Types 

   Currently, single-family homes and newer buildings are exempt from rent control. Under Prop 33, all properties—regardless of age or type—could face price controls, which would dramatically affect property values and the real estate market in general.

  1. Return of Vacancy Control  

   Under vacancy decontrol, landlords can raise the rent to market rates when a tenant leaves. Prop 33 would remove this ability, creating situations where rents are capped permanently, even as maintenance costs and inflation rise.

  1. Discouraging New Housing Development 

   By imposing stricter rent control across all housing types, Prop 33 would discourage the construction of new rental properties, which are desperately needed to address California’s housing shortage. Developers would face fewer incentives to build if they know their properties will be subject to price controls.

  1. Increased Market Uncertainty  

   Removing the stability provided by Costa-Hawkins will lead to increased market uncertainty. Investors and property owners will be less likely to invest in the rental market, and some may even sell off their rental properties, leading to fewer rental units available.

  1. Impact on Property Owners  

   Small landlords and real estate investors who depend on rental income to cover costs and maintain properties would be hardest hit by Prop 33. By capping rents and limiting rental adjustments, many property owners may struggle to keep up with rising costs, forcing them to sell or abandon their properties.

Why You Should Vote NO on Prop 33

Passing Prop 33 would harm property owners, discourage new housing development, and worsen the ongoing housing crisis in California. While rent control might seem like a solution to rising housing costs, the reality is that it creates more problems than it solves by limiting the supply of available housing and reducing incentives for property maintenance and development.

By voting NO on Prop 33, we can protect the current balance in the rental market, ensure that affordable housing continues to be built, and preserve the rights of property owners to manage their investments responsibly.

Stay Informed and Take Action

It’s important for property owners, real estate professionals, and tenants to stay informed about the implications of Prop 33. Protect your property and your investments by voting NO on Prop 33 this November.

Stay informed with the latest updates and insights on California’s housing laws and rental property trends. Protect your investments by exploring our other resources and expert tips right here on our blog.

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