How will Proposition 21 rent control measure impact Fresno-area residents? It’s complicated

OCTOBER 14, 2020 05:00 AM, UPDATED 2 HOURS 23 MINUTES AGO

Statewide rent control is back on the November ballot

Rent control will be back on the ballot this November. Here's what California voters need to know. BY ALYSSA HODENFIELD

Will the passage of Proposition 21 lead to lower rents for Fresno and central San Joaquin Valley residents? It depends on whom you ask.

The “Local Rent Control Initiative” is fracturing old alliances and pitting friends against each other.

It is supported by California’s Democratic party but opposed by Gov. Gavin Newsom, a Democrat.

It is supported by Miguel Arias, the Fresno City Council president and District 3 representative, but opposed by Lee Brand, the mayor.

It is supported by civil rights icon Dolores Huerta but opposed by the Fresno, Tulare, Kings and Kern counties branches of Si Se Puede, an organization that is closely associated with civil rights causes for Latinos.

“The housing crisis is big, and it hasn’t been talked about,” said Mari Perez-Ruiz, chair of the California Democratic Renters Council. “We have found that Prop 21 offers solutions to address the housing crisis.”

Brand, mayor of Fresno and former president and co-founder of Westco Equities, Inc., a property management/construction firm he operated for over 30 years, disagrees, arguing that the proposition will achieve the opposite of what the proponents promise. Additionally, he said the initiative will “disincentivize people wanting to build,” exacerbating the already existing housing shortage.

Play VideoDuration 4:03Fresno Mayor Lee Brand: vote no on Prop 21

Fresno Mayor Lee Brand, a longtime property management business owner, believes Proposition 21, which will expands local governments’ authority to enact rent control on residential property, is the wrong solution to high rent. BY CRAIG KOHLRUSS

The mayor said that supply and demand market forces should determine what the rents are. “If you put this arbitrary limitation on the value, these parameters out there will disincentivize people wanting to buy or to build,” he said.

WHAT EXACTLY WILL PROPOSITION 21 DO?

According to the California Official Voter Information Guide, if passed, Proposition 21 “allows local governments to establish rent control on residential properties over 15 years old. Local limits on rate increases may differ from statewide limits.”

“For far too long, people have blamed Sacramento for the lack of sufficient housing,” Arias, the council president, said. “This [Proposition 21], for the first time, will make local governments responsible for dealing with establishing the housing strategy, investing in housing, and protecting the current stock of affordable housing that we have.”

This ballot initiative will allow local governments to establish more rent control measures on housing that is 15 years and older, excluding single-family homes owned by people with two properties or fewer.

If the proposition is approved by a majority of California voters, it doesn’t go into effect immediately — a multi-step process begins. Local elected bodies would then decide if they would like to adopt additional types of rent control to properties beyond what is currently allowed under current law.

“It just gives cities the ability and the power to pass rent control measures on almost all types of rental housing,” said Veronica Garibay, co-founder and co-director of the Leadership Counsel for Justice and Accountability. “They can’t do that right now because of Costa Hawkins.”

According to the nonpartisan Legislative Analyst’s Office, the measure would empower leaders of local government to amend some of the limitations of the Costa-Hawkins Rental Housing Act and authorize cities and counties to apply rent control to more properties, specifically, most housing that is more than 15 years old.

Local governments can set caps to how much a landlord can increase rents when a new renter moves in, but the law will allow the landlord to increase rents by up to 15 percent during the first three years of a new renter’s tenancy.

However, Proposition 21 would not apply to single-family homes owned by people with two or fewer properties. It will also require that whatever rent control laws are enacted allow landlords a fair rate of return.

Greg Terzakis, senior vice president for Central California with the California Apartment Association, said that if the proposition passes, many landlords who have long-term renters and never raise the rent even when the market rate increases, will be short changed once that tenant moves out.

“If this [Proposition 21] passes,” Terzakis said, “what you’re going to see is property owners that typically would not want to increase rate every year, they’re going to feel they have to because if they don’t, they can’t recoup it.”

Congressman Jim Costa, who co-authored the 25-year-old Costa-Hawkins Act which Proposition 21 would replace, said that while he believes the present rent control law “can be improved” to better meet today’s needs, “Prop. 21 is not the right approach.”

“I agree with Gov. Newsom that Prop 21 is poorly conceived and, if passed, would not solve the rental housing crisis we have today,” Costa stated in a statement. “Certainly we need to provide more incentive to deal with the housing shortages we have in California.” Costa added the the proposition does not provide any incentives for people to invest in much-needed affordable housing for our state.

WHY DOES THIS INITIATIVE MATTER TO CENTRAL SAN JOAQUIN VALLEY RENTERS?

“There’s an affordable housing crisis and displacement in the Central Valley,” Garibay said. “So, it’s really important that we, as a community, and the region, recognize and acknowledge and start working with the fact that we have an affordable housing crisis and very severe overcrowding, and rents that are rising.”

According to the June 2020 California Housing Partnership Corp. report, Fresno has a severe housing crisis especially for low income earners, with 69% of extremely low-income households paying more than 50% of their income on housing costs, compared to just 3% of moderate income households.

After paying the high cost of housing, very low income households in Fresno County need an additional $17,074 in income each year to meet their basic needs.

Additionally, more than 35,000 low-income renter households in Fresno County do not have access to an affordable home. Low-Income Housing Tax Credit production and preservation in Fresno County decreased by 21% since 2016 while the state funding increased 54% and federal funding increased 336% for housing production and preservation in Fresno County from 2008-09 to 2018-19.

Affordable housing, as defined by the federal government, means that, after paying rent, one should still have enough money for necessities like food, health care, and transportation. Anyone paying more than 30 percent of their income on rent is cost burdened and could need affordable housing assistance.

Play VideoDuration 3:38Fresno City Concilmember Miguel Arias: vote yes on Prop 21

Fresno City Councilmember Miguel Arias, a longtime landlord, believes Proposition 21, which expands local governments’ authority to enact rent control on residential property, is a fair solution to keeping rents affordable in Fresno. BY CRAIG KOHLRUSS

According to the California Housing Partnership, as of September 2020, there are 212,753 lower income renter households in the San Joaquin Valley, and 142,480 of them do not have access to an affordable home.

“For at least the last generation, California has not built anywhere near the number of housing units -- both single family ownership and in the multifamily space,” Terzakis said.

FRESNO HOUSING AUTHORITY’S ROLE IN PROVIDING HOUSING STABILITY

The Fresno Housing Authority has not taken a position on Proposition 21, Brandi Johnson, communications manager, stated, but the agency “will continue to support our residents and local partners in creating affordable housing opportunities in Fresno County.”

Johnson said that the housing agency recognizes the significant housing need throughout Fresno County and develops affordable housing units in many communities to meet the needs for low income residents.

Since 2010, for instance, the agency has “developed over 2,100 multi-family units,” and “serves nearly 50,000 residents through housing and service programs,” she said.

The agency offers subsidized rental rates, based on a variety of factors, and the rent “generally does not exceed 30% of the household’s income,” and tenants’ rent is adjusted if the family’s income changes, helping “stabilize the family and keep them in their housing,” Johnson said.

“By offering low-income residents assistance in paying their rent, Fresno Housing is helping reduce the rent burden throughout Fresno County,” Johnson said. “When families are not rent burdened, they have more of their income to put towards education, food and other health and safety issues that are so relevant during this pandemic.”

A DIVIDING LINE — MORE BUILDINGS OR RENT CONTROL?

Prop 21 is a clear dividing line on how people think the shortage of affordable housing in California should be addressed -- whether to build more housing or to control the rate of rent increases.

Mayor Brand insists that Prop 21 is not a solution to Fresno’s unique circumstance. Instead, he advocates building more housing to alleviate the shortage but allowing the market to determine rental costs, rather than a law which could potentially deter investment in new properties.

“Your small mom and pops, if they can’t realize the return that they need to cover their expenses and, ideally, turn a small profit, they’re probably just going to sell the property,” Terzakis said. “That’s the overwhelming majority of our members.”

Terzakis said that most landlords are regular, everyday people, not corporations.

“They use their income from the rental properties to augment their retirement; they’re helping their kids or their grandkids through college,” he said. “A number of them have either parents or spouses that are in extended care facilities, and they have either dementia or health issues. That [rental units] is helping to pay what their insurance won’t pay.”

The housing crisis is equally acute in rural communities, and nearly 50% of rural renters pay more than 50% of their income for housing, according to the California Rural Legal Assistance, Inc. The group expressed concern about a rising homelessness, direct result of high rent, displacement, gentrification and criminalization laws which push unhoused people into rural areas.

“There are forced evictions, where the landlord is increasing the rent so high that families are not able to [pay],” Perez-Ruiz said. “They’re struggling at two jobs, so they bring in other family members to live in the home, two generations, people working to pay the rent.”

Perez-Ruiz said she works with tenant groups and organizations in the Central Valley which report that the “housing crisis has led to a 50% increase in homelessness” because people are not able to pay the rent.

RATE OF RENT INCREASE IN FRESNO IS HIGHER THAN STATE AND NATION

Fresno rents increased 1.7% over the past month, and have gone up by 4.3% in comparison to the same time last year, according to Apartment List’s October 2020 Rent Report. This is the third straight month of rent increases after a decline in June.

Median rents in Fresno currently stand at $926 for a one-bedroom apartment and $1,153 for a two-bedroom. The city’s year-over-year rent growth leads the state average of -4.6%, as well as the national average of -1.4%.

Still, the report shows that rent in Fresno is relatively low in comparison with other cities in the state and nation. Apartment List shows that in Seattle, for example, a median two-bedroom apartment rents for $1,940, more than one-and-a-half times the price in Fresno.

“While Fresno’s monthly rent for a two bedroom apartment seems like a dream or seems affordable, especially coming from say San Francisco or Oakland,” said Art Rodriguez, executive board member and vice-chair of the Tulare County Democratic Central Committee who is also the board president of Poplar Community Services District, “the reality is that it’s not affordable in the valley because of poverty and wages in our region.”

HOUSING AND INCOME

California Housing Partnership reports that renters in Fresno County must earn $19.66 per hour, 1.5 times the state minimum wage, to afford the average monthly asking rent. Wages in Fresno County are lower than the state and national average.

Rodriguez said that in most of the rural areas of the central San Joaquin Valley, the minimum wage income for a person working 40 hours a week averages $11 an hour, a far cry from the $19.66 hourly wage needed for affordability.

“My understanding of this initiative is to create more housing and to protect the existing affordable housing stock that we have,” Arias said. “So that people don’t go homeless because rents are going up faster than wages are going up.”

A HISTORY OF RENT CONTROL IN CALIFORNIA?

If it passes, Proposition 21 replaces the 25-year-old Costa-Hawkins Rental Housing Act, named after sponsors -- Jim Costa, representative of California’s 16th Congressional District and Republican Assemblymember, Phil Hawkins (1992-1996).

Before Costa-Hawkins, local governments were permitted to enact rent control, provided landlords received “just and reasonable returns on their rental properties.”

So the Costa-Hawkins Act primarily aimed to address the “growing discontent of landlords with the imposition of local rent control laws in cities throughout California” which restricted rent increases on occupied units, as well as set the rental rate of vacant units on the open market.

Costa-Hawkins continued to allow local governments to use rent control, except on housing that was first occupied after Feb. 1, 1995, and housing units with distinct titles, The law limited interference with the free rental market has promoted safe and affordable housing for renters, while also encouraging the development of new rental units.

If it feels like you’ve heard about this rent control initiative before, you probably have. It was on the ballot in 2018 under a different name -- Proposition 10,

Voters were not convinced then and voted 59% to 40% to reject the proposition that would grant their local governments the ability to enact rules governing rent increases.

Had it passed, Proposition 10 would have eliminated the Costa-Hawkins Rental Housing Act, the state statute that limited the use of rent control in California.

The failure of Proposition 10 did not stop proponents of rent control. California instituted Assembly Bill 1482 or the “Tenant Protection Act of 2019,” a statewide rent control on Jan. 1, 2020.

The act placed limits on rent hikes for the first time, making it illegal for residential landlords to increase rent by more than 5% annually, plus the local rate of inflation.

Supporters of the Tenant Protection Act of 2019 applaud its promise to reduce the state’s housing shortage, growing homelessness, and the high poverty rate. AB 1482 also requires landlords to show “just cause,” such as failure to pay rent, when terminating a lease.

”[AB 1482] is reasonable and will keep rents from skyrocketing. so high that many can’t afford it,” said Mayor Brand, a licensed real estate broker and general contractor and a certified property manager (C.P.M.). “That was an example of legislation that was well thought out with alliance across both sides of the aisle.”

WILL FAILURE TO PASS PROPOSITION 21 CAUSE YOUR RENT TO GO UP?

All the people interviewed for the story say that Fresno’s unique challenges of poverty, low wages and unemployment, plus severe shortage or rental housing housing are challenging and cannot be solved by one law.

Fresno is acutely short of affordable housing, needing more than 35,000 affordable housing units. Additionally, Proposition 21 excludes buildings that are less than 15 years old as well as single-family units. About 55,000 or 60% of Fresno’s existing 100,000 rentals are single-family homes.

“Rent control is needed, and limiting the rent increases can prevent thousands of families from becoming homeless,” said Tara Lynn Gray, CEO of the Fresno Metro Black Chamber of Commerce, who added that Proposition 21 “doesn’t do enough,” particularly in closing the gap in home ownership between Black and white households.

“We know stronger rent control keeps families in their homes. . . seniors and people like veterans, even critical employees like teachers and frontline workers,” Gray said. “Because we have stronger rent control, we are able to keep people where they work and where they want to live.”

Garibay adds that any effort to address rent increases to protect people in their homes and from homelessness is something that will be beneficial to the family.

The state Legislative Analyst’s Office found that Proposition 21 would increase local government costs to set up a system to regulate rents, decrease property values for apartment complexes, and result in less property tax collection on rentals. Tenants would likely move less often and pay more sales taxes with their increased discretionary income.

“Prop 21 is the same bad idea the voters rejected in 2018,” Brand stated on the California Apartment Association’s flier against the proposition. “Not only would increased fees hurt renters whose pocketbooks have already been hit because of COVID-19, mom and pop landlords who can’t pay their mortgages due to the pandemic would never recover.”

Miguel Arias disagrees. “One thing COVID-19 has taught all of us is everybody wants more local control. This [Proposition 21] is the first opportunity where voters are going to be able to express they want control versus Sacramento control over something as important as the cost of your rent.”

Dympna Ugwu-Oju is the editor for the Fresnoland Lab, a reporting and engagement lab dedicated to covering land use, housing, water and development in the central San Joaquin Valley

California’s Prop 21, not that complicated?