National City (Proposition W)
This issue is much closer to home than you may think. The National City Rent Control and Community Stability Ordinance (Proposition W) will be voted on November 6th. This ordinance will halt construction, harm the local economy, and do nothing to help with the housing crisis.
Here is a quick highlight of the ordinance’s pitfalls courtesy of ProtectOurHousing
- Caps annual rent increases at an amount equivalent to the increase in the Consumer Price Index (CPI), but never more than 5%.
- Rolls rent back to Spring 2018 for existing residents that were in their units at that time. This means if you didn’t increase your rents then, you’re locked into those rates.
- Upon receipt of a petition by a tenant or rental owner, the rent may be adjusted upwards or downwards in accordance with the Measure.
- Creates a five-member rent board. At least three members must be tenants in controlled units. There are no seats specifically for property owners. You could, in theory, end up with a 5-member tenant board.
- Creates a per unit fee to support the Rent Board, starting at $120 per unit per year (most existing Rent Boards charge $350 per unit per year). That comes right off your bottom line, while they’re already caping your rents!
- The City Council and City Manager shall have no authority to oversee, supervise, or approve the Rent Board’s budget.
- Requires Rent Board approval for all evictions (little to no recourse should they deny it).
- Property owners who fail to comply with provisions in the Rent Control Measure can be held liable for damages including emotional distress.
- The Rent Control Board will make legal assistance available for tenants related to evictions, Board petitions, hearings, and appeals.
- Enacts Just Cause Protections, limiting an owner’s right to require a tenant to vacate a unit. This makes the removal of problematic tenants very difficult, leaving good residents to suffer.
- Withdrawal of units from the market requires 120 days to 1-year notice and requires relocation assistance of $7,000 and $10,000 if they are elderly, disabled, or have minor children.
- If Costa-Hawkins isn’t repealed but Prop W passes, ALL rental units in National City must pay $80/per year/per unit for Just Cause and also will be subject to relocation fees.
- Owners who move into their own units will also be required to pay relocation costs.
- Duplexes and homes with “granny flat” rentals will be subject to rent control unless the owner lives in one of the units.
- Prohibits Ratio Utility Billing Systems (RUBs), thereby hurting conversation efforts.
- If you decide to renovate the property and put a bunch of money into it, that evicted tenant will have first right of refusal at the market rate which they rented it at before.
As you can see, this list is quite overwhelming. National City could very well set the tone for future rent control ordinances throughout San Diego County. It is imperative that this bill not pass in order to save future cities from this same disaster. There are approximately 70,000 residents in National City and 70% of the population rent. With 25,000 registered voters, it is important they are informed of the impact this legislation would have on them.
What A Failure to Kill Prop 10 and Prop W Means for San Diego
A failure to kill Proposition 10 and Proposition W would create a cascading effect. As these fights continue to go on in cities throughout San Diego County, the costs for various associations and professionals to go out and amend these ordinances to find workable solutions would become astronomical. We would be stretching ourselves far too thin. We need to send a clear message by defeating Prop 10 and Prop W and protecting Costa Hawkins.
It’s important to remember that if Prop 10 passes, that does not mean rent control is enacted. It simply allows cities the right to pass ordinances similar to what is trying to be done in National City.
Repealing Costa Hawkins and or enacting rent control in National City will not fix California’s (and San Diego’s) housing crisis.
The Impact on Development
What about developers and investors? Would the same incentives remain for them to continue to build new construction if they knew property values would be artificially capped?
A recent CoStar report discussed the impact that rent control could have on development.
“Many developers are concerned about the economic impact there will be on new development if it is subject to rent control… it would change the “whole economics” of how developers view potential development opportunities… It’s hard enough and costly enough for a developer to make a decision to build housing, and now they are put on notice that the housing may be subject to rent regulation… they may very well be unwilling to make those tough decisions of being invested in building a development”.
If developers are unwilling to build new units, which San Diego desperately needs, that is a losing scenario for all parties involved. This would place us further behind meeting the demand for housing. Alan Gin at the University of San Diego argues,
“the problem is the lack of construction of both single-family and multi-family residential units. Controlling rents would reduce the incentive to build more multi-family units”.
If developers see fewer incentives to build housing, they may turn to other development avenues like commercial, retail, office, etc…
The Building Industry Association recently commissioned a study that found that up to 40 percent of the cost of a new home is attributable to the 45 agencies that govern home building in California. This means that on a $5,000,000 project, $2,000,000 is spent paying these 45 agencies that govern homebuilding. Legislation like the California Enviornmental Quality Act (CEQA), while once good intentioned, has proven to be a major roadblock to countless developers.
Rent control not only discourages development, but it would contribute to less affordable housing developments being built. Austin Neudecker of Rev points out that rent control would increase the prices for those who cannot find a controlled unit. New York City and San Francisco are prime examples where soaring rental prices and rampant abuse of rent-controlled housing exists.
Another big concern with rent control is tenants deciding to stay for extended periods of time in their current unit or subleasing it out. This makes it harder for people who need affordable housing to get into units.
A 2017 Standford Study and this LAO report also concluded that rent control does more harm than good. I recommend giving these a read, they provide some valuable insight into what happened in San Francisco and their attempts at rent control.
Think about this for a moment. If produce is too expensive, should we limit how much the farmer makes? What about if Apple Computers are too expensive? Do we start paying people who make them less?
The same concept applies to landlords when being asked to accept rent control. Just because rents are going up, it doesn’t mean the responsibility falls on owners and developers.
Or how about this
Rent Control does nothing to empower homeownership. It doesn’t give us more supply and furthermore, it keeps you and your future heirs in a constant state of renting. Is that really what you want?
The failure of Government at all levels has created the housing crisis in California, not landlords.
Between now and November, we need that message to get to the voters, and that will require support.
More permanent solutions lie within increasing zoning, reducing the time it takes to build, and expanding our public transit system and building communities around those transit centers.
Lowering parking space requirements could prove to help as we enter a future where vehicle ownership could decline. Developers fees should be prorated by size. As it currently stands, big and small units face the same fees, which gives developers no incentive to build smaller, less expensive units.
These are just jumping off points but could be great starts to solving what is arguably one of San Diego’s biggest dilemmas. I will be updating this post as more developments arise, so please stay posted.
Where you can get involved
National City Protect Our Housing
If you know people who have property, or better yet reside in National City, have them vote no on prop W!
San Diego Union Tribune “What’s the Deal With Rent Control”
EconoMeter Critics Panel Report
Rent Control is No Answer to California Housing Crisis
Written by Blake Imperl in collaboration with Curtis Gabhart
Curtis Gabhart and Gabhart Investments, Inc – 2018 All Rights Reserved
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