Yesterday, California’s voters rejected the most recent attack on Landlords by a wide margin of roughly 65 to 35 percent. Voters hit the polls to decide on a controversial ballot initiative seeking repeal of the Costa-Hawkins Rental Housing Act, a California state law enacted in 1995. Costa-Hawkins imposed limits on municipal rent control ordinances. The limits (1) prohibited cities from establishing rent control over specific types of residential housing, namely single family residences, newly built apartments, and condos, and (2) prohibited vacancy control provisions in local ordinances. In short, the 1995 law was a protection to Landlords that tenants’ rights advocates and others, including the AIDS Healthcare Foundation, sought to repeal.

The repeal effort failed to gain the necessary support to make what would have been a momentous change in the legal landscape for California’s rental housing market. In effect, Landlords now will still have the ability to raise rents to market rates after a tenant moves out. The ballot initiate had California landlords generally, and those in Santa Monica and West Hollywood more specifically, on edge.

Here’s a refresher on why this was such a controversial issue for those with financial stakes in the California rental housing market.

The Value of an Apartment Building

If you own apartment buildings, you’ll know that the value of your property is a function of how much rental income the building produces on a monthly or yearly basis. In short, the more rental income your property generates, the more valuable it is. Los Angeles landlords of apartments that are subject to rent control are acutely aware of this.

Rent Control

Rent control is a set of laws that limits how much and under what circumstances a landlord can raise a tenant’s rent, among many other provisions. These laws can vary widely from city to city, or in many instances, there is no rent control at all. For example, the cities of Santa Monica and West Hollywood are known for very strict rent control laws, whereas Inglewood, Glendale, Torrance, Pasadena, and Burbank have nothing similar. The effect of rent control is to limit how quickly your property’s rental income can grow, in turn affecting its ability to grow in value.

In Los Angeles, the specifics behind rent control generally state that if a property contains two or more rental units on site and was built before October 1978, the landlord is limited to a maximum of 3% annual rent increases.


I know it’s getting tough to follow me here, but if you can keep your hands out of the Tide Pod jar you’ll thank me later. Imagine you’re a landlord of a rent controlled apartment. Your tenant has been there forever. Nobody ever raised the tenant’s rent. They’re paying less than half of prevailing market rents for that area. What could a landlord in Los Angeles do to change that? One of two options: (1) Approach the tenant and mutually agree to a voluntary tenant buyout (see my previous blog dated Feb. 24, 2017) or (2) Wait for them to eventually move out. When that move-out occurs, the landlord can rent the vacant apartment at prevailing rates.

Did you ever stop to wonder why you were allowed to raise the rent to market rates only after a tenant moved out? The answer to that question is Costa-Hawkins – the state law that California voters just saved. It permitted landlords to raise the rent of a rent controlled unit to market rates if a tenant voluntary left or was evicted.  This is called vacancy decontrol.

In short, without Costa-Hawkins protection of vacancy decontrol, California landlords would have lost a critical tool to raising their property values.

The Fight Isn’t Over

The November 2018 initiate wasn’t the first time tenant’s rights advocates sought to broaden tenant protections, and unfortunately, it won’t be the last. Almost every year since California rental rates became a political buzzword, there has been talk about repealing Costa-Hawkins. The most recent effort for a repeal failed in January 2018 when the California Assembly’s Housing and Community Development Committee failed to pass AB 1506 through the committee, authored by Assemblymen from San Francisco and Santa Monica.

Landlords can breathe easy with their most recent victory at the polls, but that respite will undeniably be short. The swell of public opinion and political support favoring the broadening of renter protections undoubtedly is growing. California’s politicians and voters, known for their liberal voting habits, will eventually acquiesce. The only remaining question is “when?”

Author Daniel

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