September 6, 2024, by Christie Slatcher (source caanet.org)
California’s Proposition 33, also known as the “Justice for Renters” initiative, is poised to make significant changes to the state’s housing landscape. While it is framed as a measure to protect renters, it’s crucial to carefully consider the potential impacts to property owners, residents, and the broader housing market.
As one of the Owner-Operators of Jamison Management Company, a family-owned and operated property management business with over 25 years of experience in the South Bay area, I’ve seen firsthand how critical it is to maintain a balanced approach to managing residential income properties. We focus on apartment buildings and single-family homes, and our team of licensed Real Estate brokers and Certified Housing Professionals is dedicated to helping property owners achieve the best return on their investments. We believe that the most effective way to ensure a strong return on investment is by maintaining the property and making sure residents are being treated fairly. In this article, I’d like to explore the reasons why property owners, and indeed all voters, should consider voting “No” on this proposition.
Understanding Proposition 33
Proposition 33 seeks to overturn the Costa-Hawkins Rental Housing Act, a crucial state law protecting rental housing. Costa-Hawkins Act exempts certain properties, such as single-family homes and new construction, from local rent control allowing property owners to adjust rents to market rates after a tenant moves out and a new renter moves in. Proposition 33 aims to introduce stricter rent control measures, across California. It proposes to extend rent control to more properties, including single family homes, and limit the amount property owners can increase rents each year. Additionally, it includes provisions to protect renters from eviction without just cause. While these measures are intended to make housing more affordable and secure for renters, they come with several unintended consequences that could ultimately harm the rental market, residents and property owners.
Key Concerns
1. Reduced Incentives for Property Maintenance and Improvement
One of the primary concerns with Proposition 33 is that it reduces a property owner’s financial ability or incentive to maintain and improve their properties. Rent control caps the potential return on investment for property owners, making it less attractive to invest in upgrades and regular maintenance. Over time, this can lead to the deterioration of rental properties, ultimately harming renters who are supposed to benefit from the proposition.
2. Impact on New Housing Development
California is facing a severe housing shortage, and new developments are crucial to address this crisis. However, stricter rent control measures can deter developers from investing in new rental housing projects. If Proposition 33 passes, developers might shift their focus to non-rental housing projects or move their investments to other states with more favorable conditions. This could exacerbate the housing shortage, making it even harder for Californians to find affordable housing.
3. Financial Strain On Small-Scale Property Owners
Large corporate property owners might be able to absorb the financial impact of rent control, but small-scale property owners, who own just one or two properties, could be hit hard. Many small property owners rely on rental income to cover their mortgages, property taxes, and maintenance costs. Proposition 33 could place these property owners under significant financial strain, leading to increased foreclosures and a reduction in the number of available rental properties. The strict housing regulations could also encourage these property owners to sell their properties as they no longer desire to navigate the complex laws and higher costs inherent to being a Landlord.
4. Unintended Consequences for Tenants
While the intent of Proposition 33 is to protect renters, it could lead to several unintended consequences. For instance, property owners might become more selective in choosing renters to mitigate the risk of being unable to increase rents in the future. This could make it more challenging for certain groups, such as low-income individuals or those with imperfect rental histories, to secure housing. Additionally, reduced property maintenance could lower the overall quality of rental housing.
With more stringent rent control laws, property owners might choose to sell their rental properties. When these sales occur, the new investors (often institutional investors) will rehab the properties and significantly increase the rents to cover their costs which negatively impacts affordability for renters as it ultimately increases market rates for that property and the area. Additionally, as more property owners sell their rental properties, this could reduce the supply of rental housing, making it even more challenging for renters to find affordable options.
Furthermore, if property values decline due to expanded rent control, local property tax revenues could suffer, reducing funding for essential public services.
Why Voters Should Vote “No” on Proposition 33
Protecting Property Values and Quality
Voting “No” on Proposition 33 helps ensure that property owners have the necessary incentives to maintain and improve their properties. This is essential not only for protecting property values but also for ensuring that renters live in safe and well-maintained homes.
Encouraging New Housing Development
To address California’s housing crisis, it is vital to encourage new housing development. Proposition 33’s restrictive measures could hinder new rental housing projects, worsening the housing shortage. A “No” vote supports a more balanced approach that encourages investment in new housing while addressing affordability issues through other means.
Supporting Small-Scale Property Owners
Small-scale property owners play a crucial role in the rental market, providing diverse housing options for renters. Voting “No” on Proposition 33 helps protect these property owners from financial strain, ensuring they can continue to offer rental properties without being forced out of the market.
Avoiding Unintended Negative Consequences for Renters
While well-intentioned, Proposition 33 could have several negative consequences for both property owners and renters. A “No” vote avoids these pitfalls and encourages a more nuanced approach to addressing housing affordability and tenant protections.
Conclusion
Proposition 33 presents itself as a solution to California’s housing challenges, but from a property owner’s perspective, it poses significant risks. Reduced incentives for property maintenance, deterrence of new housing development, financial strain on small-scale property owners, and potential negative consequences for renters are all critical factors to consider. By voting “No” on Proposition 33, voters can support a more balanced and sustainable approach to housing policy that benefits both property owners and renters in the long run.