Q: I’m looking for information on the real estate related propositions included in this November’s voter ballot. What do they really mean for me personally?
A: Yes, it’s that time of year. Your neighbors have signs up telling you which way to vote. When it comes to real estate, this is an especially hot button issue, because whether we are a home owner, a tenant, or a landlord, EVERY ONE of us generally has the majority of our income at stake.
Let’s take a look at Proposition 10. Nothing stirs up the population like rent- In Los Angeles, according to Zillow, even renters in the area’s median income bracket are spending almost half of their monthly income on rent. It’s the highest percentage among all 35 metro areas studied by Zillow, even New York City. And remember, LA has rent control now! So, what’s to be done about it? The lack of affordable housing in Los Angeles is at crisis level, and impacts so many other issues in our area, of course, including homelessness.
Prop 10 is on the ballot as a proposed means of addressing affordable housing. It seeks to repeal the Costa-Hawkins Act, a state law that took effect in 1995, and put some limitations on broad forms of rent control. The main protections included were:
- a) exclusion of single family homes from rent control;
- b) exclusion of properties built at that time forward from rent control (1995) (This also froze cities in place in regard to their year built exclusions at the time- since Los Angeles had a 1978 cut-off at the time of enactment, the City could not change that year, even to 1995); and
- c) prohibition against vacancy rent control- this restricted the laws in some cities, such as Santa Monica, where landlords were required to keep the rents tied to the previous year, even for new tenants.
How you feel about Prop 10 may depend somewhat on your world outlook. Some believe that housing is a “right”, and like health care, must be provided, regardless of ability to pay. The question becomes- Who should be required to provide that service at less than market value to take care of those who need assistance? Should it be the government, building housing and providing it to those in need? Or, if you vote yes for Prop 10, do you place that financial burden entirely on the individuals who own income property? There is a misconception that most rental properties are owned by large corporations who are getting rich on the high rents with no compassion to those in need. In my more than 20 years as a real estate attorney, often representing landlords, I generally saw individual landlords who owned one or a couple of buildings or business owners who may have owned a moderate number of buildings. What I witnessed, exclusively in rent-controlled areas of Los Angeles, was a struggle to break even financially.
Unfortunately, lower income housing often brings less than ideal tenants, desperate to hold on to it at all costs. I have seen tenants crowd their apartments, intentionally cause damage to their apartment and/or the building in order to create costly code violations for the landlords and reduced rent for themselves. I wish that I could say these were the exceptions. There certainly are also many good, hard working tenants out there. Many of these apartment buildings, built in the 1920s through 1970s need extensive maintenance that the rent control income simply makes unaffordable. What I’m saying is it’s not necessarily the poor vs the rich here- there are individuals facing tough financial issues on both sides of this issue.
Prop 10 will allow every City to pass new, broader rent control laws, and the mayor of LA has already indicated that he will do just that. Will it help? Your rent won’t go down. Chances are, you will have an even harder time finding a new apartment, as people tend to cling to their rent control apartments, greatly contributing to the shortage of housing. Every study of rent control concludes that while it does help certain tenants lucky enough to get in, it worsens the availability of affordable housing overall.
If you own a home, or hope to, and would like the option to rent that home out for income when you retire or when you travel, this Proposition makes your home fair game. When you decide to sell your home, it will be with the tenant in place (as a sale is not grounds to evict), reducing your sales price because of the cost and length of time necessary to relocate a tenant for someone who is buying your home to live in. This is a complex issue- it’s not owners vs renters- both groups need to educate themselves on the options and whether you believe this Proposition is the best solution. Either way, don’t forget to vote!!
Disclaimer: This article is intended to be primarily for entertainment purposes and is not to be considered legal advice.
ABOUT LISA PHILLIPS, ESQ./ CA Dept. of Real Estate, License #01189413
Lisa Phillips is an active Realtor® in the Los Angeles area, a licensed Broker and Attorney for more than 20 years. Lisa is also a member of the National Association of Realtors “Green Resource Council”, having achieved its “GREEN” Designation, and a Broker-Associate with Real Estate Collective. Her unparalleled knowledge of real estate, from local markets and pricing to legal issues and deal-making, has made her a trusted and valuable asset to her clients. In addition to her real estate and business savvy, Lisa is passionate about helping others, and works tirelessly for her clients, as well as several charitable causes. For more information or to have a question answered in a future Q&A column, please email [email protected] or visit www.LisaPhillipsRealEstate.com.