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Costa Hawkins: the California law renters want repealed, explained

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The law “has kept cities like Los Angeles from protecting our tenants for too long”

California cities could choose to expand their rent control laws to newer buildings if Costa Hawkins were repealed.
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For for first the time in history, California has implemented rent control statewide. But it has an old law on the books that curbs how individual cities and counties implement rent control at the local level.

That law is known as the Costa Hawkins Rental Housing Act. Established in 1995, it sets limits on the kind of rent control policies cities are able to impose. Right now, more than a dozen places statewide have their own rent control policies—many of them stricter and more comprehensive than the new state law.

In the LA area, rent control policies exist in communities in unincorporated Los Angeles County, along with the cities of Culver City, Inglewood, Los Angeles, Santa Monica, and West Hollywood.

There has been movement among tenants right advocates to repeal Costa Hawkins to give the cities the ability to expand and strengthen their rent control policies. Now—as the COVID-19 pandemic pummels the economy—forcing many Angelenos out of work, a half dozen Los Angeles City Councilmembers are joining the chorus and calling for the California governor to suspend Costa Hawkins.

Unless Costa Hawkins is lifted, several councilmembers say they do not have the authority to stop landlords of buildings that are not rent-controlled from hiking rents.

“Costa Hawkins has kept cities like Los Angeles from protecting our tenants for too long,” says councilmember David Ryu. “In a pandemic, this is the least we can do. No one should face a rent hike during this emergency.”

There’s also a statewide ballot initiative called the “Rental Affordability Act” that would repeal Costa Hawkins and is eligible for the ballot in the November 2020 election.

The initiative is similar to Proposition 10, which California voters rejected in 2018. But the Los Angeles-based AIDS Healthcare Foundation, which is backing the initiative, says the language of the measure will be clearer this time.

Amid a statewide shortage of affordable housing, supporters say repealing Costa Hawkins will give cities important new tools to protect affordable housing. But opponents argue it could worsen the crisis.

Given the new level of scrutiny over the bill, here’s a short explainer of what Costa Hawkins actually means for California residents.

What is Costa Hawkins?

Costa Hawkins is a state law that sets some requirements for the cities in California with rent control—the city of Los Angeles included.

There are three main provisions:

  • It protects a landlord’s right to raise the rent to market rate on a unit once a tenant moves out.
  • It prevents cities from establishing rent control—or capping rent—on units constructed after February 1995.
  • It exempts single-family homes and condos from rent control restrictions.

The state bill also prevents cities from updating date-of-construction provisions in ordinances in place at the time of its passage.

The city of Los Angeles’s main rent control law is the Rent Stabilization Ordinance, or RSO, passed in 1979. It restricts rent control to units built prior to October 1978, a date frozen in place by Costa Hawkins.

Under the RSO, yearly rent increases are capped at 3 to 8 percent, but landlords who own buildings constructed after 1978 are subject only to California’s new restrictions on rent gouging. The state bill limits yearly rent increases to 5 percent, plus the local rate of inflation (which averaged 2.5 percent in Los Angeles County between 2001 and 2018). In years when the rate of inflation is particularly high, rent hikes are capped at 10 percent.

The bill was adopted in 1995 to reign in rent control in five California cities, including Santa Monica and West Hollywood. Those five cities had what’s called vacancy control, which is when a unit’s rent is capped even after a tenant moves out.

Costa Hawkins was also a key part of a 2009 court decision that struck down LA’s requirement that developers include affordable units in many new apartment buildings. The courts said that Los Angeles’s rules violated Costa Hawkins by mandating lower rents for newly constructed units. A bill signed by former Gov. Jerry Brown in 2017, however, restores the ability of California cities to make developers include affordable units in new rental projects.

What would happen if it were repealed?

In the short term, not much. Assemblymember Richard Bloom, who introduced a failed repeal bill in 2017, has said that getting rid of Costa Hawkins would only give local governments greater flexibility when setting rent control policies. Cities would still need to go through the process of passing new legislation before the repeal would have any effect.

In an effort to preserve affordable housing, some cities might expand rent control regulations to prevent landlords from raising rent on a unit to market rate once a tenant moves out as.

The city of Santa Monica, for example, estimates that because of Costa Hawkins, as many as 500 units reset to market rate every year.

Why not repeal it and see what happens?

Opponents of a repeal argue that Costa Hawkins puts sensible restrictions on local policies that affect the state’s overall housing market.

A 2016 report from the Legislative Analyst’s Office found that expanding rent control “likely would discourage new construction” by limiting the profitability of new rental housing.

Opponents say this could exacerbate a statewide housing shortage and scare off developers worried about sudden policy changes in cities with rent control.

The report also predicts that stricter rent control rules would encourage discriminatory behavior on the part of landlords when selecting tenants.

What do those in favor of repeal say?

Supporters say that city leaders should be given the tools to protect tenants in the midst of a severe affordable housing crisis (a 2019 report from the California Housing Partnership Corporation found a shortfall of more than 500,000 affordable units in Los Angeles alone).

They also say policies at both the state and federal level already exist to ensure rent control regulations don’t prevent landlords from receiving a “fair return” on their properties. Protections for tenants facing stiff rent increases, on the other hand, remain slim in most of the state.

Bloom and Assemblymember David Chiu, who co-authored the 2017 repeal bill, argued at the time that new construction alone would not be enough to make housing affordable to tenants now being priced out of expensive cities like San Francisco and Los Angeles.

What’s next?

With enormous opposition from landlords and their representatives, supporters of the repeal measure face an uphill battle. Given the small number of California cities that actually impose rent control requirements, they may also have a tough time convincing voters outside those cities that they should care.

Still, with rising housing costs around the state, the number of cities with rent control has increased in the last couple of years.