Proposition 5 and Proposition 10

What is costa hawkins?

The housing crisis in California is well documented - rental prices are rising faster than wages, and median family homes make the problem only worse. Large metros saw a sharp increase in homelessness, and gentrification pushed secondary markets to unseen before heights. Repealing Costa Hawkins will seemingly not add a single housing unit to the market, or allow landowners to develop denser building - it calls for housing affordability by allowing local cities to establish artificial price barriers through rent control.

Expanding rent control has some merits. Families need housing stability - especially in secondary markets not regulated by rent control. There is nothing preventing landlords from raising rents outside a rental agreement, which is typically only for 1 year under current California law in most cities. Providing a 60-day notice for tenants to pay more rent or leave the unit is simply not sufficient, especially when considering public school placement is based on home address, daily commute, and moving expenses.

Rent control also offers low-income and seniors on fixed income a permanent housing solution and security - which we continue to see today in communities with established rent control laws. Expanding rent control to more properties could potentially include more residents with those protections.

Most importantly - rent control provides local authorities power and leverage over landlords.

The possible scenario of single family homes with permanent tenants will be a major focal point in the upcoming election, especially in communities dominated by homeowners. Property owners know too well risk of providing local bureaucrats an open wallet and broad power. Other implications should be considered as well:

1. Property taxes - expanding rent control means less income for apartment buildings. Property owners affected by lower rents can request a reduction in value and pay less property taxes as a result. This is negatively affect public schools and other local service that are partially funded by property taxes. It is unclear how the proponents of the Costa-Hawkins repeal are planning to account for the reduction in revenue for the state/county.

2. Ellis act acceleration - opportunistic landlords used the Ellis act to evict low-paying tenants for a conversion opportunity. It is too-easy to focus on the offenders who are abusing the Ellis act for what it really is: removing a unit from the rental market so it can be used for a purpose other than a rental. The question is too-often not asked - why would property owners in affluent areas

3. Tenants renting out rooms in your homes could stay there permanently (rent control tenants could only be evicted for cause, and stay in as long as they pay rent, even beyond the lease expiration)

In November 2018, California voters will vote on two very important propositions that could affect their home prices (and purchasing decisions) dramatically. If you own a home or planning to purchase one in the next few years, proposition 5 and 10 could have an impact on your investment.

Proposition 5 will allow homeowners over 55 (or severely disabled) to transfer their low property tax to their newly purchased home with slight adjustments. Under the current property tax laws, purchasers can transfer the rate only if the new home is cheaper or same value as the current one, and it can transferred only once. The new law will allow unlimited transfers to any county in the state. The goal is to encourage property transfers which would otherwise not occur due to proposition 13 limitation of property tax increases. The idea is to allow seniors who want to move out of their large home to smaller homes, and carry the significant property tax discount from their current properties. It will also allow those who are seeking a hard money loan to purchase a home a much easier path to do so since the property taxes will be lower than if they bought it outright.

This seems like a rare win-win-win to everyone involved:

Home owners can sell their current home and transfer most of the property tax discount to their new property. Home buyers will enjoy a fresh supply of homes for sale - which could help many markets with supply problems. This could also be a victory for the county tax assessor - it is true that the property tax transfer could carry over indefinitely, but it is likely that most of those senior would not sell and move out without Proposition 5. The new property tax will be slightly higher, which will produce additional tax revenue for the state.