Congrats! You made it through another election season.
Whether your candidates, measures, etc. won or lost, I hope you felt a sense of how lucky we are in this great country to make our voice heard and exercise our right to vote.
Now comes the tricky part – interpreting the results of some complex measures. I am here to help break down the real estate related issues.
This election cycle in California brought two important real estate measures – Prop 33 and 34.
Let’s dive in…
Proposition 33
“EXPANDS LOCAL GOVERNMENTS’ AUTHORITY TO ENACT RENT CONTROL ON RESIDENTIAL PROPERTY. INITIATIVE STATUTE.”
This proposal aimed to increase local government control to enact rent control.
Specifically, Prop 33 targeted the Costa-Hawkins Rental Housing Act of 1995. This current state law (the Costa-Hawkins Rental Housing Act of 1995) generally prevents cities and counties from limiting the initial rental rate that landlords may charge to new tenants in all types of housing, and from limiting rent increases for existing tenants in (1) residential properties that were first occupied after February 1, 1995; (2) single-family homes; and (3) condominiums.
This measure would repeal that state law and would prohibit the state from limiting the ability of cities and counties to maintain, enact, or expand residential rent-control ordinances. Essentially, this decision came down to how rent control affects owners and tenants.
Some say rent control stabilizes rental costs for tenants, while others argue it could hurt private property owners, like small landlords and prevent new buildings to solve the lack of housing across the state. Repealing Costa-Hawkins could have huge implications for rental property in California and would allow for new laws and regulations to be implemented by local jurisdictions.
In the end, the vote was called early as Prop 33 failed to pass with 60.5% of statewide voters saying “NO.”
So the current rent control laws will stay in place as-is.
Proposition 34
“RESTRICTS SPENDING OF PRESCRIPTION DRUG REVENUES BY CERTAIN HEALTH CARE PROVIDERS. INITIATIVE STATUTE.”
Prop 34 Requires health care providers meeting specified criteria to spend 98% of revenues from federal discount prescription drug programs on direct patient care.
It applies only to health care providers that: (1) spent over $100,000,000 in any ten-year period on anything other than direct patient care; and (2) operated multifamily housing reported to have at least 500 high-severity health and safety violations. The penalties for noncompliance of spending restrictions would be revoking health care licenses and tax-exempt status.
While this might seem complicated, only one entity in California would be impacted: the AIDS Healthcare Foundation.
If the proposition were to pass, it would limit the AHF’s funds for being used for political campaigns and consequently limit their influence on property legislation. It requires 98% of revenue to be spent on direct patient care related costs.
The AHF has been funding rent control legislation in California in past election cycles, including Prop 33 this year. This is essentially a fight between landlords and AHF on how non-profit funds can be spent on housing initiatives.
Those against the measure called it a “revenge initiative” and that it prevents AHF from advocating for tenant rights. While, supporters believe it prevents a misuse of funds.
Prop 34 calls attention to the AHF’s spending and influence on housing policies and what seems to be a key issue of rent control.
So what were the results of California voters? It is still too close to call. At the current moment, 50.8% say “YES” while 49.2% say “NO.” It might be weeks until we have the final results in this hotly contested issue.
Conclusion
Proposition 33 and 34’s results show that rent control laws and the entities that fund them are a major hot-button issue in our great state.
Like the previous two election cycles with voters firmly rejecting new rent control policies, Prop 33 was a resounding third try that was voted down yet again. It is clear that California residents do not have the appetite for additional rent control laws and complex regulations.
Prop 34 is a reaction to the entity (the AHF) responsible for putting proposed rent control laws on the ballot over the past six years. If it were to pass, no other people or entities seem to have the political will to fight for future rent control legislation like the AIDS Healthcare Foundation…especially when its three ballot initiatives have failed.
As a result, California will likely not see future rent control related initiatives on ballots for years to come.
If Prop 34 fails, then if past history is any indication, the AIDS Healthcare Foundation is sure to come up with its next rent ballot initiative in two years time.
For now, there are no direct changes to real estate as the election results stand currently.