Articles

Vote NO on Proposition 10

August 2018

There are two measures on the ballot for November 6th, both affecting property owners. Proposition 5 and Proposition 10 — and, as always, both are complicated.

Proposition 5 (aka the Portability Measure) is intertwined with Proposition 13 (1978), which is California’s best protection limiting property taxes, since it holds the State’s portion to 1%. That 1% gets added to by each City and County, depending on overhead (yearly tax rolls) and local voting (such as for schools, libraries & parks). Prop 5 attempts to improve Props 60 and 90. These allow owners (over 55) to buy something of equal or lesser value in another county and take their lower property tax and their base with them to their new home. Not all 58 counties allow this, though, and the list changes yearly. Prop 5’s goal is to make 60/90 used statewide, although I’m still unclear as to how that affects Prop 13. Presently, all bay area counties do allow the Prop 60/90 tax transfers & some southern counties, as well. I encourage each of you to do your own research on this by comparing Prop 13, 60 and 90 with the proposed Prop 5. If people over 55 sell, due to this incentive, and buy elsewhere in California, it could increase available properties in the more densely populated areas (stabilizing prices) and bring money into less populated areas (increasing values), as just one positive example. For me, so long as Prop 13’s 1% statewide tax protection remains intact, I’m for Prop 5.

Proposition 10 is the one that’s already getting lots of conflicting advertising time, and its wording ties it to California’s homeless rate (although its impact is far greater, ultimately), so I’ll go into this one in more depth. There is a strong pro-housing contingent (including Mayor London Breed) that supports voting “NO on Prop 10”. This vote means that California’s statewide Costa-Hawkins Rental Housing Act, enacted in 1995, stays as it presently exists. No change and no repeal. However, if Costa-Hawkins is repealed, it would be damaging to our area and further reduce available housing for both owners and renters.

What is Costa-Hawkins? It protects a landlord’s right to raise the rent to market rate on a unit once a tenant voluntarily 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 and prohibits municipalities from expanding rent control to include “vacancy control.”

Vacancy control means taking away the rights of landlords to increase the rents of vacant units to match market price.  Repealing Costa-Hawkins would reduce landlords’ incentives to rent vacant units. Particularly, in small apartment buildings, where the landlord and/or their family might possibly live.

Repealing Costa-Hawkins allows government to dictate pricing for privately owned single-family homes, and controlling how much homeowners can charge to rent out their home – or even just a room.  It could even lead to bureaucrats charging homeowners a fee for taking their home off the rental market, even when they go to sell their home.  Recently, our Board of Supervisors toyed briefly with the idea of charging a penalty to homeowners with vacant rooms that could be rented out. Luckily, there has been silence and no action, as yet.  So, it is important we protect homeowners’ rights, rather than have a mass exodus from San Francisco into the outlying counties. Voting NO on Proposition 10 does that.

The coalition for No on Prop 10 comprises affordable housing advocates, renters, seniors, large and small businesses, taxpayer groups, and veterans.  They listed some further problems to be aware of, should Prop 10 pass:

1. Puts as many as 539 rental boards in charge of housing and gives government agencies unlimited power to add fees on housing that will be passed on to tenants in the form of higher rents – making homes and apartments even more expensive.
2. Requires California taxpayers to pay the proponents of the initiative’s legal bills if homeowners, tenants or voters challenge the law in court.  Even if the proponents lose in court, taxpayers will still be on the hook to pay their legal bills.
3. The state’s non-partisan legislative analyst says the measure could increase costs for local governments by tens of millions of dollars per year and cost the state millions more in lost revenue, which might then divert funds from other vital state services.
4. New government fees and regulations will give homeowners a huge financial incentive to convert rental properties into more profitable uses like short-term vacation rentals – increasing the cost of existing housing and making it even harder for renters to find an affordable place to live.
5. Declining Quality of Housing. By depressing rents, rent control policies reduce the income received by owners of rental housing. In response, property owners may attempt to cut back their operating costs by forgoing maintenance and repairs. Over time, this can result in a decline in the overall quality of a community’s housing stock.
6. No protections for renters, seniors, veterans or the disabled.

If Costa-Hawkins is repealed and vacancy decontrol with it, once a low-paying tenant leaves, the unit might never hit the market again. Instead, due to the landlord’s perceived risks in re-renting it, there is a high chance it will be left vacant or family members moved in. I’ve, also, seen units used either for storage or, surprisingly, for pet-sitting one or two well-trained dogs (weekly). Presently, a month of daily pet sittings can be comparable to the income from a tenant or roommate, minus the risk of losing one’s life savings, and oftentimes way more fun. So we really do need to seriously consider the pros and cons created by these various Propositions we are asked to review and vote on, regardless of them oftentimes being way beyond the skill level or time availability for the average person.

The repeal of Costa-Hawkins in San Francisco would make an already limited housing supply worse, as it prohibits vacancy control. Presently, when a tenant voluntarily moves out, the property owner can adjust the rent to the current market rate.

Costa-Hawkins also limits rent control on new construction. Mayor Breed has pledged to “build more housing, and build more housing faster”.  If Prop 10 passes, developers would opt out of building new housing. These developers already have to deal with a planning process that takes way too long for approvals, numerous delays, increased low- and moderate-income housing units, anti-car use and parking, and record high construction costs. Rent control on new housing will mean that thousands of new housing units will simply not be built. They’ll take their money and their jobs elsewhere.

Costa-Hawkins limits rent control on single family homes and condos. This type of housing represents the investment of the “Mom-and-Pop” real estate investor. Oftentimes, the rent from these units are the primary source of income for seniors, immigrant families, and other working-class San Franciscans. Proponents of Prop 10 argue that the initiative would make housing more affordable — that logic is deeply flawed. Rent control on single family homes and condos would lead to small property owners selling or taking inventory off the market, rather than remaining in the landlord business.

If you do nothing else, please, vote No on Prop 10, Tuesday, November 6th.  Urge your friends, family and neighbors to vote No on Prop 10, as well. Mayor Breed and the great City and County of San Francisco are counting on you.