California voters may have an opportunity come November to overturn the state’s Costa Hawkins law, which prevents localities like Beverly Hills from extending protections to all who rent housing. This “gift to landlords” (in their words) has handcuffed local officials for decades. With the Affordable Housing Act initiative about to qualify for the ballot, the stakes are high and landlords are apoplectic at the prospect. Let’s take a look at the law’s affect on rental housing in Beverly Hills and the proposed initiative’s objectives.
The effort to put the Affordable Housing Act on the November general election ballot is a grassroots response to the state’s rental housing crisis. It is an urgent public policy problem that has found no solution from our legislators in Sacramento. So housing rights activists have themselves taken on the task of forcing a Costa Hawkins repeal statute onto the law books.
We can see that the rising cost of housing of every kind in California is outpacing stagnating household income. But the change in the cost of rental housing in particular relative to the rise in consumer prices is what’s putting additional stress on households – and nowhere more so than in Southern California.
- There are a number of reasons why high-and-rising rents here are stressing those who rent:
- Cities are more attractive and are seeing a net in-migration of residents from other areas;
- More households want or need to rent given the changing nature of households (more single-occupants) and/or declining rates of homeownership due to cost and means;
- Increased competition for relatively scarce rental units means that all households feel the price pressure when more-advantaged households ‘trade down’ yet pay higher rents; and,
- Local governments like Beverly Hills fail to prevent the loss of rentable units due to redevelopment, condominium conversion, unit combination and even short-term rentals.
The Affordable Housing Act enumerates no fewer than fourteen indicators to highlight the role of Costa Hawkins plays in our housing crisis.
What Does Costa Hawkins Mean in Beverly Hills?
The City of Beverly Hills extends rent stabilization to all rental properties of two-or-more units EXCEPT single-family homes (it is actually the first identified exemption), condominiums, subsidized housing, and any dwelling unit created after February 1, 1995. Also exempted are accessory structures in R–1 single-family zones. That is the impact of Costa Hawkins here. 
How many renting households go without protection due to Costa Hawkins? It is difficult to say with precision because many households go uncounted in city figures. They rent single-family homes, accessory structures, and condominium units that are exempted from rent stabilization. Indeed the city collects only data for purpose-built rental housing – and only since last year!
To understand how Costa Hawkins affects households in rental multifamily housing, I compared the city’s first-ever Rental Housing Initial Data Survey (April 2017) against the numbers of rent-stabilized units as recently disclosed by the rent stabilization program. I see a whopping difference between the survey’s tally and the totals from the city’s rent stabilization registry. Gone missing are 35 properties inclusive of almost 1,000 units. Where the Initial Data Survey counted 1,131 properties (8,662 units), the number registered was only 1,100 properties (7700 units).
What accounts for the diminished number of rent stabilized units?
The most likely explanation is that our rent stabilization ordinances have conspired with the Costa Hawkins law to greatly limit tenant protections. It appears that about one thousand households that rent housing receive no local protections (like the cap on annual increases and the relocation fee). By the numbers it is clear that Costa Hawkins has taken a real bite out of tenant rights in Beverly Hills.
The other explanation is more problematic: that the city has not properly accounted for all of the units that should be rent stabilized.There are entirely vacant buildings that are probably not counted at all. There are condo buildings that never should have been exempted. And of those units even inventoried, 5% were reported as used by the landlord. Some number have been combined to create larger units, but that takes an additional unit off the market. If we subtract all of these from the registry-identified unit totals (itself a subset of all multifamily units) it becomes clear that our rent stabilization program simply doesn’t have the reach it should.
We Need to Repeal Costa Hawkins
The Costa Hawkins law limits the ability of local governments to extend tenant protections by completely exempting apartments built after 1995. It also exempts single-family homes and most condominiums. These carve-outs greatly limit the reach of tenant protections and they get more traction over time: any rental housing built from now on will forever remain beyond rent stabilization.
And second, the law allows landlords to raise any regulated unit’s rent to whatever they want when that unit becomes vacant. Called vacancy decontrol, this is the real “gift” to landlords and it extends to every apartment regardless of any rent stabilization program. Despite the landlords’ bellows of protest at our temporary 3% cap, or our relocation fees, or even the rental unit registry, the fact is that a landlord’s investment in rental housing returns outsized gains over time due to vacancy decontrol and asset appreciation. The proof is in the listings: rental properties in Beverly Hills tend to come to the market less frequently than elsewhere and buyers tend to greatly overpay. Why? Because they, and their financiers, see the promise of outsized future returns even with rent stabilization in place.
Repealing Costa Hawkins would be the single most important step to take to support residential stability for those who rent in Beverly Hills. That’s why we should all go to the polls in November to cast our vote for the Affordable Housing Act ballot initiative.
Costa Hawkins has deprived localities of the ability to regulate rental housing all across the state. And that has contributed to the housing crisis we face. Yet there has been no effort by the legislature in Sacramento to step up to help. Our own Assemblymember Richard Bloom has co-sponsored a number of bills (including Costa Hawkins repeal and a current bill to tighten regulations on Ellis Act displacement) but those bills gain little traction among landlord-friendly legislators.
That’s why fair-housing activists have stepped in. The AIDS Healthcare Foundation has formed the Coalition for Affordable Housing to put the Affordable Housing Act to a vote of the people. If approved by voters in November, the initiative would repeal Costa Hawkins in order to return local control over rent stabilization to cities like Beverly Hills.
The Coalition has won endorsements of repeal from City of Los Angeles, West Hollywood and many community organizations. Even City of Beverly Hills expressed interest in supporting a state bill to repeal Costa Hawkins.
We should all support this ballot initiative in November because Costa Hawkins is a gift that has kept on giving for far too long at the expense of tenants.
That’s why landlords are moving so aggressively against the initiative. The gift given by the legislature is a gift that can be taken away by the people. For cities interested in protecting its renting households there is no more fundamental step to take.
Costa Hawkins is Just the Beginning
With Costa Hawkins out of the way the focus then would fall on Beverly Hills to enact greater tenant protections. What could we do?
The city could extend rent stabilization to all tenants regardless of rental housing choice. We could put an end to no-just-cause eviction. We could regulate rents in a manner that allowed only a specified increase in the asking rent upon vacancy (not the sky-high asking rents I’m seeing on my block today). We could put some restriction, any restriction, on a landlord’s ability to withhold rental housing so that we don’t have buildings emptied for renovation and resale.
Of course Beverly Hills could acknowledge that constrained local supply is a problem too. What to do? The city should identify a set of housing policies that will encourage production to relive the pressure on current tenant households and target production to the places we want it. There are far too few multifamily units produced here at (any price tier) and those that come through the pipeline are condominiums. The city also sets a generous ceiling on condominium conversions, too. Both wipe out the supply of relatively affordable units we have today.
The need is clear: because our city is permitting basically ZERO housing units, as demand rises so does the rent.
Legislators in Sacramento recently fired a shot across the bow when they considered SB 827. The bill would have mandated a generous housing density bonus near transit (basically much of Beverly Hills would have been affected). The bill was withdrawn after a groundswell of opposition.
Better that Beverly Hills steps up with solutions to the rental housing crisis. Rent stabilization is just the beginning, and Costa Hawkins repeal is just a step in the right direction. But it is a step that voters can take as early as November.
- Costa Hawkins was applied too strictly in Beverly Hills when it came to condominiums. As of 2002, the state law carved out a narrow exemption of certain condominium units retained by the divider but unsold on the market. Indeed there are such units in Beverly Hills but those renting households never received any local tenant protection because our law puts all condominium units beyond the reach of rent stabilization. ↩
- If you signed the petition we briefly circulated to put the Affordable Housing Act on the ballot, I thank you! If you were ready to sign but couldn’t for whatever reason, no worries: the Coalition was able to deliver more than a half-million signatures to the Secretary of State. Currently the petition is up for qualification pending signature verification. Stay tuned! ↩