AAGLA-Oct2018

46 OCTOBER 2018 • WWW.AAGLA.ORG AN ARTIFICIAL CRISIS: Proposition 10, Rent Control and the Affordable Housing Lie By Danielle Elliott California faces disaster in November if voters pass Proposition 10, the Local Rent Control Initiative, which would make rent control possible in all types of housing. Misleadingly named the “Affordable Housing Act,” Proposition 10 is ostensibly designed to combat the soaring cost of rental housing by reversing the 1995 state law, the Costa Hawkins Rental Housing Act. In fact, Proposition 10 would put every property – whether a single-family home, condominium, or multi-family unit – under government control, forcing all private housing to ostensibly become public housing. California’s supposed “affordable housing crisis” was created by environmental groups, led by the politically ambitious activist and former capitalist hedge fund billionaire-turned-climate change-Eco socialist Steve Steyer and the ideology of a self-righteous, one-party state legislature intent on increasing social spending by taking over the housing industry and imposing additional extreme environmental regulations. Such regulations have already curtailed housing construction. Like many deceptively named initiatives, the Affordable Housing Act is anything but that. It is completely erroneous to pretend that the only way to attain affordable housing is through rent control. Since California has the highest income tax of any state and one of the highest overall state tax burdens, residents are being misled into thinking that the passage of this Act will provide them with some relief. Passage would result in a large loss of tax revenues from a declining real estate market that would mean ever- increasing and never-ending taxes on everyone, especially property owners. Remarkably, little attempt has been made to determine the fiscal impact of Proposition 10. Yet the California Secretary of State’s website says Proposition 10 would mean “potential increase in local government costs of up to tens of millions of dollars per year in the long term, likely paid by fees on owners of rental housing.” In reality, this means administering the new law would require a huge bureaucracy, funded entirely by property owners. Passage of Proposition 10 would mean more property rights would be taken away. According to the CATO Institute, when government takes away uses of property through regulation, owners often are not compensated for their losses. If they are, the compensation is inadequate. However, over the past two decades, the courts have determined that reductions in property values from 75% to 92.5% because of regulations do not constitute a “taking” worthy of compensation, even though property rights have been seriously compromised. Rent control under Proposition 10 would amount to a taking of property rights. First, because the decline in rents reduces the value of the property. Second, because the owner cannot use the property as he or she sees fit and cannot maximize the profitability of the property. How We Got Here The near collapse of the global financial system in 2008 had dire effects in California. Property owners lost homes, developers and investors lost their properties, and many lost their life savings in the stock market crash and Great Recession that followed. While tenants benefited from lower rents, real estate investment declined, and the already over-regulated construction industry slowed to a crawl. Feature Story