Costa-Hawkins Repeal (California)

Count_Chocula's picture
Rank: Neanderthal | 2,153

Any of you nerds tracking it? Looks like it will be on the ballot in November (should be confirmed by June 28th). Could be bad news bears for a lot of California resi guys (yours truly included).

Considering buying the July puts on Essex.

Comments (96)

May 29, 2018

From everything I've heard, from research analysts to brokers to owners, odds of passage are real and possibly even greater than a coin flip. I work in SoCal and the bill definitely has a lot of investors spooked. Puts on Essex don't sound like a bad idea, although keep in mind takeout odds are still pretty decent in REITland. The apartment names have been trading at pretty steep discounts for a while now...although ESS still trades above the group. Maybe Costa-Hawkins isn't getting priced in, or perhaps the public market thinks it won't get repealed.

May 29, 2018

Same vibe here in SF. We're giving a lot of money to the PACs fighting this as are our REIT counterparts. Odds it gets on the ballot are like 99%; once on it I'd bet you're looking at 60%-70% chance that is passes.

ESS trades at a discount, but 90%+ of its FFO comes from California... why would someone take them out with no prospect of future growth? I wouldn't, but I guess I could see some scenario in which someone is willing to take a bet that the bark of repeal is worse than the bite or sees limited downside in taking them out at a low enough price.

As an example, I have a deal tied up right now, and if I can only grow my rents 2% over the hold (vs the 4% I'm projecting currently), the price I would be willing to pay, to get the same return, drops 13.5%. Ain't pretty.

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May 31, 2018

I get your point about ESS, but I don't think the verdict is out on the true impact of rent control in these cities. Sure your rent pops are now capped, but the supply dynamic is likely to change given revenue potential just took a major hit. But I'm with you, overall the downside seems pretty high for ESS.

May 31, 2018

Well said and all fair points.

May 29, 2018

If these idiots pass it, they deserve all of the plight that it brings them. How many case studies do they need to be provided to understand that rent control doesn't work in a vacuum and isn't going to move the needle meaningfully?

The vacancy control tack-on is the biggest part of the lunacy.

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May 30, 2018

Agreed. No one out here wants to hear it though unfortunately. If this was an economics issue the Bay Area would be stamping out more units than friggin Dallas, but it's a political issue and re-educating voters on the issue is a lot harder than it ought to be. Once you explain the facts to people, everyone gets how bad it is, but it's difficult to reach that many people and educate them on the issue.

Not to mention, opposing rent control in a place like Berkeley or SF will get a politician run out of town on a giant piece of avocado toast.

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May 30, 2018

@Count_Chocula - I'm tracking it too. Are there any good articles or websites that you've been tracking?

Also, should Costa Hawkins be repealed, does anything immediately change? Or does it set the table for jurisdictions to begin to implement more aggressive rent control laws?

PS - People in with residential exposure to California should be following this thread very closely as this is extremely important to the Real Estate market. Not to mention, the repeal of Prop 13 that could have very negative implications on the market in CA.

May 30, 2018

I own SFR but I don't live in any of the major supply constrained metros, so while prop 13 would be huge for me, the CH repeal wouldn't have an immediate impact on me.

May 30, 2018

@MonkeyWrench , if CH was repealed, wouldn't that mean SFR was eligible to be under rent control? My understanding was that CH prevented rent control on SFR; so without it, it would allow rent control laws to be back in play.

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May 30, 2018

That's my understanding too - no immediate impact, but it would allow cities to create new rent/vacancy control laws. Not very familiar with how that would work - if it's something a city council could implement or if it would take another election cycle and a public vote, but not good news either way.

Prop-13 repeal would be much bigger deal in my opinion. For how ass-backwards CA is on many tax fronts, the property tax framework is one of the more logical ones in the country. Not only does the residential aspect keep both of my grandmothers in their homes, but I think that it is just as important on commercial end helping property owners keep expenses predictable for tenants and saving significant time and money on consultants and appeal process.

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Jun 5, 2018

Agree that Prop-13 repeal would be bad but if vacancy control is implemented it's game-over for any landlord in the municipality this is allowed. The state might face a full blown civil war if vacancy control was enacted.

Most Helpful
May 30, 2018

@The Duke of Wall Street Nothing really jumps to mind. I just poke around google every week or so for an update. There are a lot of left leaning, pro-repeal folks that are tracking it actively. I know that they repeal folks have submitted ~588k signatures and they're confident that they have enough to get it on the ballot. I've posted an email from Barry Altshuler from EQR at the bottom with more details.

Nothing will "immediately' change if repealed. Costa-Hawkins puts guard rails on what municipalities can and cannot do in regards to rent control (most notably preventing it from being applied to SFH and new multifamily housing). I used quotations earlier, because my layman's guess is that repeal proponents will already have some a form piece of legislation that they will prepare and give to local city council persons across the state that will be put to a vote almost simultaneously with the referendum vote. The results may vary across municipalities, but my guess is that you'll see caps on rents that prevent increases of more than 2% and vacancy controls in some of the crazier areas.

In short, it is all dictated at the local level.

Result is that property values will drop, new development will stop, and us resi guys will be fucked. To quote one developer I know in SF, "We'll close up shop, because we'll never be able to get an equity partner to invest here again. They think we're all making hand over fist and that we can afford it, but I'm not eating all of this risk and dealing with the City of Oakland for my fucking health."

Re: Prop 13 repeal, Green Street did a great right up on it earlier this year that folks should read if they can. Basically, it would hit all commercial assets (excluding multifamily). Affects me less as a resi guy buying new-ish assets, but sucks for long term holders and folks with a crazy low tax basis.

Colleagues:

Today the proponents of the Housing Freeze initiative turned in 588,000 signatures to county election officials, which is enough to qualify for the November 2018 ballot. This was expected and is what we have been preparing for since last year. The initiative is now considered "eligible" for the November ballot. Proponents technically have until June 28 to remove it, but after spending over 2 million dollars to qualify the measure, it is extremely unlikely they would do so.

While still early in the process, our campaign is underway and is working on several fronts to defeat the initiative. We have done research on the policy implications as well as the most effective way to talk about the initiative. We are reaching out to hundreds of organizations throughout the state to educate them about the policy flaws of the measure and to encourage them to oppose. For many groups it is still early to take positions, but we anticipate the coalition to grow over the next few months. Key talking points and some campaign outreach materials are attached for your reference.

Additionally, a campaign landing page has been set up: NoHousingFreeze.org. The web site will house key campaign information and materials. We will also be launching our social channels such as Facebook and Twitter soon and we will have a robust digital program to build an online community of property owners and others interested in defeating the Housing Freeze.

We will continue to keep you updated as the campaign progresses, but feel free to contact us with any questions.

Barry

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May 30, 2018

@Count_Chocula Fantastic write-up. I would give 2 bananas if I could. Given that a major benefit of Costa Hawkins is Vacancy Decontrol, would a repeal implement Vacancy Control in any city that previous had it (I'm not sure if any did)? Otherwise, I imagine it would be put up to a referendum as mentioned.

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May 31, 2018

Great write up - thank you +1 Scary times in the golden state.

Glad that there is some seemingly organized opposition. Is four months enough time to teach a bunch of mouth breathers some basic economics?

May 31, 2018

Hey guys, new to the site. I'm here as well in the trenches of L.A. looking ahead at what may be coming down the pike if there is a repeal. On a local level, I go into RSO buildings and deal with tenants directly. I know this place like the back of my hand and have been dealing on all fronts from brokering to investing since 2006. I can honestly say the volume of deals that have gotten price reductions after first circulating is at or above 50%. I hear countless stories of owners unloading now to avoid the housing downfall heading our way at much lower prices than first offered out.

Offering tenants voluntary buyouts has been a big boon for local and even foreign investors, knowing that creating value sometimes works moreso than buying something non-rent controlled and waiting for attrition. Values are going to change dramatically, but long term guys will still find opportunity in any market. There's a lot of negative feelings in the air towards L.A. multifamily, namely Costa-Hawkins repeal and rising interest rates. Not only do higher rates affect the debt, but also the proceeds.

As much as renters think the landlords asset is the only thing that will be affected by rent control, they too hold an asset, their lease. Losing the ability as a tenant to negotiate the value of that asset if you happen to be in an under-market rate unit that has substantial upside would be harder for them to absorb than a landlord on that asset. Being a part of the process to vacate units at a cost that is built into our acquisition model and still reach an intended target that gives us a good exit has been what most value-add guys have done for years.
I do believe this will be a long, drawn out battle, and for someone who's knee deep on all fronts in the marketplace, I have a new found respect for the long-term guys doing the best they can to steadily increase NOI while holding on to assets that some people couldn't stomach due to quality of tenants and other issues being tough to bear.

May 31, 2018

@dsan79 - I'm unable to PM you since you're new. Could you PM me? I would like to hear more about your experience with RSO.

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May 31, 2018

How about you email me? It says I have to wait a couple days before I can PM anyone. daniel @ daniel in la . com

No spaces, just added them so my email doesn't get scraped and spammed. Thanks.

Jun 5, 2018

Tracking this closely and praying the law of unintended consequences doesn't materialize. Right now the CAA is trying to compromise with the state before the June 28th deadline to pull the ballot measure. See below:

A statewide lobbying group that represents landlords is supporting a cap on rent increases in an effort to stave off a ballot measure that would expand rent control across California.

The California Apartment Assn. says it's OK with limiting annual rent hikes to the cost of inflation plus 5% alongside property tax breaks for apartment owners who covert residences to low-income rentals. UC Berkeley researchers proposed both ideas this week.

"We like the direction where there's a combination of anti-price gouging with tax incentives," said Debra Carlton, the association's senior vice president of public affairs.

The backdrop for the rent control debate is an initiative put forward by tenant groups that would repeal Costa-Hawkins, the 1995 state law that restricts cities and counties from implementing most new rent control policies. The initiative, which is expected to collect enough signatures to get on the statewide ballot, is likely to be one of the highest profile political fights in November. Carlton has previously estimated her group would spend $60 million to defeat the measure.

Researchers at UC Berkeley's Terner Center for Housing Innovation said their proposal to add tenant protections and incentivize the creation of new low-income housing could eliminate the need for the November initiative. Had the proposal been in place last year, tenants in non-rent-controlled apartments and single-family homes in Los Angeles could not have had rent increases higher than 7.8%.

Tenant groups, however, greeted the Terner Center effort coldly. Dean Preston, executive director of statewide renter organization Tenants Together, said the initiative simply overturns the prohibitions on new rent controls, allowing cities to develop their own policies. There's no need, he said, to abandon that effort in exchange for new rules against price-gouging.

"With so many people's homes on the line, the Terner Center's approach here is pretty reckless," Preston said. "The proposal is unclear, riddled with inaccurate assumptions, and put out there with zero consultation with tenant groups."

The deadline for supporters of the initiative to remove their measure from the November ballot is June 28.

Meanwhile, bills backed by tenant groups continue to face strong opposition in the Legislature. Earlier this year, a bill that would have repealed Costa-Hawkins failed to advance from a legislative committee.

Two other pro-tenant bills, one that would have required landlords to list a reason before evicting someone and another that would have made it harder to convert existing rent-controlled apartments to condominiums, were trounced in votes on the Assembly floor Thursday.

A third bill, which extends the time tenants have to respond to eviction notices, squeaked through the Assembly on Thursday by two votes.

Jun 5, 2018

Good shit, and thanks for sharing. Do you know who from the state needs to sign off to get this pulled from the ballot?

Jun 5, 2018

Not too sure. Our group is still trying to understand the legal process on this as well. Again, from what I understand this proposal is completely contingent on the group who proposed the ballot measure accepting which is anyone's guess.

For those interested check out the podcast "Gimme Shelter" on Soundcloud where this is being hashed out with some high level CA players. There is even one with Michael Weinstein (AIDS Healthcare Foundation President who has funded and started this ballot measure) who doesn't sound like a guy who will comprise on anything other than a full repeal which as the informed know is likely to be devastating on many fronts.

Going to the Marcus & Millichap event in DTLA Thursday hoping to learn a little more information and see where our industry stands as of now. Happy to report back soon.

In the meantime...any CA attorney's lurking on here who can add some color on this?

Jun 5, 2018

Update just came in from my boy Barry; time to open the wallets boys:

The purpose of this memo is to provide you an update on the statewide campaign to protect Costa Hawkins, alert you to a policy paper from the Terner Center regarding counter options to repealing Costa Hawkins, and an article that appeared in the LA Times late Friday afternoon citing the Terner Center policy paper.

Our efforts to have the Costa-Hawkins Repeal Measure removed from the ballot have not been successful to date. Though it is possible that Weinstein, ACCE and the Eviction Defense Network can remove the measure from the ballot, they have until late June to do so, the odds of this happening remain highly unlikely. Thus, the campaign to defeat the measure continues as planned without any hesitancy or deviation. The campaign's next poll is currently in the field and will assist us in furthering refining our messages to voters.

On a positive note, The Terner Center for Housing Innovation, UC Berkeley, issued a policy paper (see attachment) late last week that assists in changing the narrative regarding rent control as a panacea to the housing affordability and housing supply challenge, and the efforts to repeal Costa Hawkins.

The policy paper, "Finding Common Ground on Rent Control" succinctly points out that repealing Costa Hawkins will not address the fundamental housing crisis facing many California residents, particularly low income and working-class families and will actually act as a deterrent to the development of new housing.

Specifically, the Terner Center proposes the state should adopt:

  • A broad "anti-gouging" rent cap applied to all rental units statewide that would make it illegal to raise rents above specific amount, determined annually by formula.
  • An incentive to developers of new and rehabbed rental buildings to include on-site BMR units in exchange for property tax relief.

    Though the devil is in the details, changing the discussion away from rent control to "anti-gouging" and the importance of new and rehabbed units to include BMR units in exchange for property tax relief opens up a host of options versus an outright repeal of Costa Hawkins.

These options can include:
1. Means testing
2. Addressing current rent control ordinances, which significantly limit annual rent adjustments (even though the Terner Center recommends not touching existing local laws)
3. And requiring cities to meet housing production goals

Given the importance of the Terner Center policy paper, Californians For Responsible Housing, CAA's campaign, sent out a press release (see attachment). The salient points of the press release are as follows:

"Unlike the proposal that may appear on the November ballot that will act as a catalyst to
further worsen California's affordable housing crisis, the two policies in this report appear at
first glance to be a responsible middle ground," said campaign spokesperson Steven Maviglio.

"An anti-gouging cap along with tax incentives to promote construction of new affordable
housing could be an effective combination to address rising rents while creating incentives to
build the 1.8 million housing units that our state needs by 2025."

Lastly, the Los Angeles Times ran a story late Friday afternoon (see attachment) on the Terner Center policy paper. The Times story selected a few points embedded in the policy paper, including a recommendation that rent control measures should include provisions for reasonable annual rent increases. The paper mentions CPI plus 5% and a maximum annual increase of 10% to comport with state law as it relates to "anti-gouging" during state of emergencies.

Despite the headline and writings of the reporter, neither the campaign nor CAA has taken a formal position on the Terner paper or the specifics included in the Terner report. Debra Carlton's specific quote in the LA Times story regarding the report is accurate, the headline and statement that CAA supports rent caps is not--no such statement or message was ever communicated.

The silver lining in the LA Times story, aside from changing the rent control narrative, is Tenants Together's response to the Terner Center Report. Specifically, Dean Preston, President of Tenants Together, calls the Terner Center Report "reckless." Calling the report "reckless" assists the save Costa-Hawkins campaign to paint the radical tenant groups as unreasonable with public officials and the general public.

Should you have any questions or comments regarding the campaign please contact us. Also, if you have not already done so, please go to the campaign website (www.savecostahawkins.org) and make your industry ask contribution in the amount of $50 dollars per unit to help fund our campaign.

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Jun 13, 2018

@Count_Chocula

So after a few events last week including the M&M SoCal event it's clear the threat of Costa Hawkins getting repealed is really starting to slow down transactions and has a lot of groups playing defense. Talked to a handful of brokers who say deals in certain municipalities are garnering fewer offers than they have ever seen, i.e. Berkeley, Santa Monica, West Hollywood, San Jose etc. Some of these cities have what are called "springing ordinances" meaning that any rent control/vacancy control laws that were in place prior to Costs Hawkins can be voted on immediately by city council and enacted. (assuming it's repealed)

In the case of my group we're passing on deals in places we would love to own, in one example San Jose, because members of the city council have already voiced their affection for implementing vacancy control. Not being dramatic but whereever vacancy control is enacted it's game over. Not really sure how to make money with that in place or why an owner would want to be there if that's the case.

On a positive note one of the speakers last week was Eleni Kounalakis who will most likely be the Lt. Governor behind Gavin Newsom. (not getting political here but just assuming these two are voted in) Very bright and accomplished woman who actually grew up working for her fathers development company who built tons of the single family homes in Sacramento and then went on to work for George Marcus at Summerhill. While she didn't get too granular she clearly understands repealing Costa Hawkins is not the answer (Newsom holds this position as well). Not sure what this means for us informed folk but again was good to hear that the entire state isn't completely void of Econ 101.

To give everyone an idea of how scary it might get if this thing is repealed I've put below what the City of Santa Monica is proposing if Costa Hawkins is repealed:

*The Santa Monica City Council will be meeting on Tuesday, 6/12 at 5:30 pm and will consider a proposal from Santa Monicans for Renters' Rights (SMRR) (Item #13A on agenda) to create a new 4-5% "windfall profits tax" for multifamily property owners to be placed on the November 2018 ballot. This proposal is being considered in anticipation of the Costa-Hawkins Act being repealed.

The new windfall profits tax would be on: 1) all apartment buildings built after 1979 that have not been rent controlled and 2) all rent controlled units that have been brought up to market rate using vacancy decontrol at any time from 1995 to present (as currently allowed under Costa-Hawkins). 72% of all current rent controlled units in Santa Monica will require this new tax to be paid by the property owner. The proposal does not specify how many prior years would have to be paid based on this new windfall tax, nor how the windfall amount would be calculated, nor what happens if the property has been sold between 1995 and present.
In addition, the proposal would abolish vacancy decontrol and re-establish vacancy control. This means that rent controlled units would no longer be able to be brought up to market rate even when a tenant vacates. Instead, it would only allow a 5% increase IF the unit was voluntarily vacated (not evicted for non-payment of rent) and this increase could only happen on the unit once every 5 years.

Further, the proposal would establish rent control on all multifamily buildings in Santa Monica. Those buildings not previously under rent control would have a base rent established. Building built from 1979 through 1999 would have the base rent in effect as of January 1, 2018 (retroactive to beginning of 2018). For buildings built after 1999 would be under rent control on the 20th anniversary of their certificate of occupancy and the base rent would be the rent as of one year prior. This means that a building built in 2000 would be under rent control in 2020 and the base rent would be 2019 rent.

AAGLA encourages all Santa Monica members to attend the meeting on Tuesday night and voice their opposition to this proposal by SMRR.

Jun 13, 2018

Did anyone attend this meeting? If so, what are the takeaways?

Jun 13, 2018

I'm watching it live. Going to be a long night. They're only on item #7 (talking about scooter and bike sharing for the last hour #scooterlivesmatter). Rent Control is item #13 on the agenda.

They post these meetings the following day as well.

Jun 13, 2018

Awesome update, thank you. I'm reaching out to a couple of our Bay Area brokers and some guys we've bought stuff from in LA to see what else they can share. I'll share an update here as I get more intel.

The springing ordnance thing is very scary; I figured the lobbying groups would have legislation ready to go after the vote, but I wasn't expecting that they'd just revert back to older legislation.

That Santa Monica shit is frightening...

Jun 13, 2018

I'm looking to play this from the other angle ... if it does get passed I'll be looking to move into a vacancy controlled place in Santa Monica with market rents from 1984

Jun 20, 2018
Pio nono:

I'm looking to play this from the other angle ... if it does get passed I'll be looking to move into a vacancy controlled place in Santa Monica with market rents from 1984

my man

Jun 13, 2018

Here is some more color on the "springing ordinances" and the Berkeley example.

This is a very thorough and concerning article. It seems Berkley has an existing rent control policy established in 1980 that would become the guiding housing policy in the absence of Costa Hawkins. The 1980 policy includes vacancy control and Berkeley is now discussing 'how' to implement vacancy control if Costa Hawkins is repealed, which includes excluding single family rentals and ADUs from vacancy control.

The City and public commentary in this article is very concerning.

http://www.berkeleyside.com/2018/06/06/berkeley-pr...

Jun 19, 2018

Bump for updates

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Jun 20, 2018

Only real update is that the measure will officially be on the November ballot as the "Affordable Housing Act" (the irony) and is now in the hands of the voters. Thanks to Michael Weinstein both sides will spend millions (CAA likely upwards of $60M) in an effort to completely confuse the masses as to what the future of CA multifamily looks like...

The year was 1978. A small group of prominent apartment builders and owners established the National Multifamily Housing Council (NMHC) for a singular purpose: to fight rent control. Here we are 40 years later, and, sadly, another round of the debate has begun.

In response to rising housing affordability challenges, renters and activist groups coast to coast are mobilizing in the name of housing justice. They're pushing hard for more rent regulations from Massachusetts to California.

We know how deleterious rent control can be. It can actually do more harm than good. Not only does it fail to address many of the underlying issues, like supply constraints, rising development costs, and stagnant wages, but it ultimately undermines local and state economies. However, when passion and deep pockets find a raw nerve, a clash is inevitable. And make no mistake: This round will be epic.

Today's debate over rent control has its roots in the early 1970s. It was an era marked by social and political turbulence and economic strife as inflation swelled out of control. In response, government intervened and we saw initiatives such as wage and price controls and, eventually, rent control.

Rent control hit a fever pitch by mid-decade. The NMHC responded with a systematic attack on rent-control restrictions, which by then had stymied rental housing development in 35 states. California was ground zero for the debate.

What few realize is there was something else going on in California at the time that not only helped set the stage for more aggressive rent-control measures but also offers a glimpse of what could happen in the future if many of today's rent-control initiatives are left unchecked.

In 1978, an anti-tax activist named Howard Jarvis began drumming up support for Proposition 13, which essentially capped property taxes. Like a Pied Piper for California, he promised homeowners and buyers a rosy future if they would help him get Prop 13 passed. It was an easy sell when many had experienced large annual increases in their property taxes.

There were warnings about the grave fiscal consequences that would invariably flow from such legislation, but the populist, anti-tax tsunami swept the proposition to a resounding victory.

Today, there's a new Pied Piper in California, and his name is Michael Weinstein. Well known and well heeled, Weinstein is an activist by trade. He's been busy of late collecting signatures to underpin a ballot initiative for the fall of 2018 that would repeal the Costa-Hawkins Rental Housing Act, which established a statewide ban on rent control for buildings built after 1995.

Like Jarvis, Weinstein is fabricating a fiction where rent control will somehow stabilize the rental housing market writ large in California. While a lucky few could benefit from his proposal, it also would be an unmitigated disaster for the state's housing markets and economy.

For decades now, economists and academicians of all political persuasions have debunked the meretricious allure of rent control. And it's a relatively simple truth: Rent control does nothing to promote the production of rental housing.

And when there's strong demand and no mechanism for increasing supply, it raises housing costs and hurts affordability overall. Layer in onerous regulations, punitive entitlement processes, and stagnant wages and it's hardly surprising rents have climbed.

But Weinstein's message resonates strongly with people who've experienced seven or eight years of rent increases that have outpaced their paycheck growth.

This is how we find ourselves once again at an existential moment in our industry's history. And it's likely to be all-hands-on-deck for a bloody, expensive and, ultimately, senseless fight that should never have gone this far.

The total cost of the Weinstein initiative has the potential to reach $100 million or more. And similar fights, albeit on smaller scales, continue to crop up in other markets. That's a lot of money earmarked for political and legal battles that could be used to support actual solutions; i.e., initiatives and programs that result in the real production of much-needed housing units. For example, a $100 million equity fund dedicated to affordable housing could make a measurable difference.

So, while we need to continue to vigorously oppose the resurgence of rent-control measures, we also need to focus on finding solutions. Given the scale and social and economic impact of the problem, as well as the costs associated with fixing it, these solutions are undoubtedly going to require public-private partnership.

Local, state, and federal governments; the housing industry at large; and the broader business community are all going to have to engage with each other to develop creative solutions to the affordability issue. Without such cooperation and coordination, housing costs will continue to escalate, hurting our residents, our industry, and the communities in which we work and live.

Jul 16, 2018

GlobeSt had another interview related to CH repeal this AM: http://www.globest.com/2018/07/16/a-costa-hawkins-...
Not the most insightful read, but made me think of something: is this impact going to be felt uniformly across all markets?

Obviously markets where there is a springing ordinance will feel it worse, but among markets with no existing rent control, are investors going to be focusing on political climate and making bets about whether or not rent control will be implemented, or will the possibility of rent/vacancy control impact pricing across the board?

Is housing affordability going to get so bad in CA that even more conservative districts end up implementing some form of rent/vacancy control?

And from an institutional perspective, obviously most of the reits and big institutions have concentrated in newer high end projects which are less likely to be directly impacted by rent control - what are some of the 2nd order consequences that are going to hit these guys?

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Jul 22, 2018

Just saw this from a friend but Los Angeles County Supervisors Kuehl and Solis are working to place a 3% rent cap moratorium in the unincorporated areas of Los Angeles County. The supervisors are trying to rush through this limit at their meeting on July 31st. You can read about the proposed ordinance and meeting below. I'm not too familiar with this but trying to learn more. Has anyone heard about this?

http://file.lacounty.gov/SDSInter/bos/supdocs/1239...
ATTEND IN PERSON
New Meeting Date:
Tuesday, July 31, 2018 at 9:00 A.M.
Board Hearing Room 381B
Kenneth Hahn Hall of Administration
500 W Temple Street, Los Angeles

Sep 10, 2018

So we're moving closer towards the November vote. Has anyone heard how Prop 10 is polling at this point? For other principals on here have your partners hit the brakes on acquisitions for now? On another note, should Costa-Hawkins be repealed has anyone heard anything about what the state can do at the Legislature or Governor's level to stop a full blown disaster in CA?

Sep 10, 2018

Not so sure if I trust polls in 2018 like a did just a few years ago. See a comment below. Article is linked.

"A 2017 poll by the Institute of Governmental Studies at the University of California, Berkeley, found that 60 percent of likely voters support rent control."

10% rent bumps don't sound so bad for landlords.

"In 2017, Portland voters found a clever way to circumvent Oregon's state ban on rent control. Landlords in that city must now pay moving fees up to $4,500 to tenants if they evict them or raise their rents by more than 10 percent without just cause."

https://www.citylab.com/life/2018/07/rent-control-...

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Sep 10, 2018

I work for a big national developer and we've fully pumped the brakes on new CA deals. I don't think anybody knows how the vote is going to shake out besides stating that it certainly has a real chance of passing.

That being said, I imagine it will take months and even years to fully understand how this will impact rent control policies at the individual city/jurisdiction level. Liberal areas like LA are obviously more likely to implement rent control law, while more conservative jurisdictions like San Diego are going to be more of a stretch.

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Sep 10, 2018

+1 SB - very helpful to hear from big-player's perspective. Are you fully out on anything in California for the time being or still open to places where you anticipate municipality driven rent control to be a harder sell? (SD, OC, etc.) Curious if there will be a buying opporunity in some of these places if MF prices in CA general take a dive if this passes.

Sep 10, 2018

At this point, we are starting to look at deals again based on the premise that LOI negotiations + PSA negotiations would push us past the November date anyway. But, there is no way we would sign a contract today without knowing, really anywhere in CA.

Sep 10, 2018

Down here in SD County ground zero for rent control is considered National City. 70% of the residents are renters. I don't see many other cities down here going with rent control unless it's south of Downtown heading to Mexico.

Sep 10, 2018

I think there are odds we get a reset. Like the needle gets moved to 1992 or whatever that date is on how old rent controlled units can be, and then we move from there.

Sep 10, 2018

I tend to agree with you, but that isn't really how repeal would work. It'd be up to each municipality to do their own rules and laws which is the biggest risk around all of this.

Sep 10, 2018

You think it'll really play out that simple of a yes no on the first vote? Lets say it goes no then we start changing things on the ballet to get it to go through like a reset on vintage of Rent control or something else less drastic.

I think we are definitely at a tipping point where something is going to happen with rent control, but I think this first vote is just to get a real feel for what is going to happen.

Sep 21, 2018

"We need more affordable housing and housing for the homeless. We need greedy landlords to put a -5% YOY change for rent mandated for all existing buildings. We need those damn greedy developers to make new housing for those poor families. But not near me, I can't stand the construction noise. And we need less dense units so the traffic isn't so bad. And don't think about touching the dry cleaner shop I once visited while my washing machine broke when I was a student at UCLA, that building has architectural value. But those developers need to solve all this problem, how difficult can it be?" - Most CA residents

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Sep 21, 2018

Actual quote from a Cupertino resident regarding redevelopment of a vacant shopping mall which includes some affordable units:
"According to the sales pitch, the new housing units would include low-income high-density housing apartments," read a slide that accompanied his speech. "This would mean that we would have uneducated people living in Cupertino. A lot of other residents and I are concerned that this would make the current residents of Cupertino uncomfortable, and would split our city in half."

In the meantime, my paper straw disintegrated in my iced coffee this morning. Wild times here on the left coast...

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Sep 21, 2018

Low income and high density = uneducated. Wow... You cannot even make this stuff up. People are just weird.

Sep 25, 2018

I actually believe this statement was from a 7-year boy who wanted to speak up at the local meeting. At least that's what the Mayor of Cupertino, who was on the Gimme Shelter podcast recently, mentioned.

But there are people out there who probably share that sentiment, no doubt.

Sep 23, 2018

I'm all for federalism and for letting the people of California fuck themselves over, but what continues to happen is that failed economic policies push people out of those failed states and into successful ones, slowly reorienting their new home to the failed policies of their old homes.

You've seen this in Colorado, New Hampshire, Virginia, and North Carolina, among others. Next on the list is Kansas, Georgia, and Texas. These people are like a cancer.

Sep 24, 2018

You think its bad now? Wait until Amazon HQ2 is announced to be in Virginia.

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Sep 24, 2018

Re. Cupertino deal, the low income component is a very smart play by Peter Pau utilizing sb35 as a fuck you to the entitled assholes in Cupertino.

Sep 24, 2018

Very savvy move. First deal in the state using sb35 I believe. His legal bill for that one is going to be absurd though.

Sep 24, 2018
Count_Chocula:

Very savvy move. First deal in the state using sb35 I believe. His legal bill for that one is going to be absurd though.

But the look on the faces of those entitled NIMBY liberals when they realize they're going to have "poor people" sharing their city is priceless.

Sep 25, 2018
Doekim:

Re. Cupertino deal, the low income component is a very smart play by Peter Pau utilizing sb35 as a fuck you to the entitled assholes in Cupertino.

I hope I am wealthy enough one day to pull something like this

Sep 27, 2018

There may be some light at the end of the tunnel. Some of latest polls/surveys are showing 48 percent of voters opposing it, 36 percent in favor and 16 percent undecided.

Sep 27, 2018

Not to be the negative one here but these polls are meaningless. I would argue polls in the other direction would be more helpful to the No on 10 cause right now as it may disincentive groups to keep donating. The industry goal of $60M in fundraising has not been reached. Last I heard was mid $40M's. If anything I hope we can continue to raise money and address Costa-Hawkins through reasonable terms in the coming years. Most importantly prior to the 2020 elections for obvious reasons. Don't be fooled by these polls, this thing is still a 50/50 coin flip in my opinion. One thing that still scares me is the sheer amount of industry people that don't realize how important this vote is for entire country. Tenant groups in other cities (Seattle, Portland, Denver, Chicago, DC etc) are all watching this vote and and using it as a blueprint moving forward. This will simply be the tipping point for all of the multi-family and single-family industry. So to any of the folks on here who aren't directly involved in CA multi-family and think they're safe you're not. As mentioned above if Amazon HQ2 goes to DC/NoVa everyone in the beltway better be ready to fight similar battles.

Sep 27, 2018

Yeah polls are polls. They're no accurate prediction of the future. It's nerve wrecking how much its freezing the industry though.

Kind of curious are there any multifamily guys out there considering, or being forced to make some career changes given the potential outcome? What are you guys hearing about from higher ups and the future of your job?

Sep 28, 2018

I agree 100%. Met with a Seattle broker last week who was stroking a check to help fight repeal. This vote will have a lot of tails an unintended consequences.

That said, glad to see the polls moving the right way, but now is the time to step on the gas with the fundraising and voter education as this thing can move against us quickly. Going to be an interesting 5 weeks or so.

Oct 19, 2018
Nov 5, 2018

Bumping this since the voting is tomorrow. Seems like this is trending towards no but it's based off the $ behind it influencing the undecided.

Nov 6, 2018

Tomorrow is judgement day haha. Polls are showing it's probably not gonna go through.. but we shall see

Nov 6, 2018

Polls said the same thing about Trump... fingers crossed on this one though.

Robert Clayton Dean: What is happening?
Brill: I blew up the building.
Robert Clayton Dean: Why?
Brill: Because you made a phone call.

Nov 7, 2018

Time to get to work on the legislature to make sure we aren't doing this again in 2020, because we'll lose then.

Nov 7, 2018

My worthless two cents would be get a piece of legislation drafted with all parties in mind, then get two-thirds approval from each chamber of the CA legislature to sign off and send it to the 2020 ballot (50% is passing) where we can vote for it as a CA constitutional amendment. That way it would take a 2/3 majority to ever overturn it which would be damn near impossible if it was reasonable for all parties, say cap rent increases at 10% or something like that and make vacancy control flat out illegal. That's just a start but it I think we could get groups behind that and then we don't have to waste $100M on a prop that could be used to build more housing or use towards research on cheaper building techniques. Either way this is a win for the entire country as other states will soon face similar battles.

Nov 8, 2018

The direct democracy system that California and other states have is a ticking time bomb. People always vote for low taxes relative to spending (or vice versa). The electorate cannot be trusted to make specific policy decisions, which is incredible insight that America's founding fathers possessed.

Nov 9, 2018
Nov 15, 2018

Well...looks like the fight continues...for anyone that owns in Glendale FYI.

Glendale now looking to implement Rent Control:

http://www.latimes.com/socal/glendale-news-press/n...
Not looking good as both options are going to throw a huge wrench in the market. To have a mayor do a complete 180 in a matter of months on Rent Control is pretty frustrating.

Nov 15, 2018

How can people of the Left be so consistently economically stupid year after year, decade after decade, in country after country, with all that we know about housing policy?

Nov 29, 2018
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Nov 29, 2018