Robbie Sequeira | (TNS) Stateline.org

California voters this month trounced a proposal to lift statewide restrictions on local rent control, signaling to other left-leaning states that similar caps on skyrocketing rents might be an uphill climb.

It was, in fact, the third time Californians have said no.

The measure’s defeat disappointed tenant advocates who argue that rent control would help curb the rapid rise in rents across the state. But for landlords and the housing industry, the latest defeat of the ballot question signals that statewide rent control remains a tough sell.

“I think it’s actually more clear now than ever that rent control on a statewide level isn’t something most Californians want,” said Alexandra Alvarado, director of marketing and education at American Apartment Owners Association, an industry group that helps landlords with tenant screening and other services.

“This is the third time it’s failed, and I think that sends a strong message,” she said. “But I also think that those who are deeply in support of rent control aren’t going to stop trying to put it up for a vote.”

Polls show about three-quarters of Americans believe housing affordability is a significant problem — but California was the only state in the 2024 election cycle to put up a tenant protection measure for a statewide vote.

Proposition 33 asked California voters if they wanted to repeal the state’s 1995 Costa-Hawkins Housing Act, which restricts local rent control on apartments built after that year in most of California, and on all single-family homes and condominiums. Many supporters of the law think it has kept California’s housing market open to new development.

The measure drew significant investment from both sides. The Los Angeles Times reported that backers of Proposition 33, led by the AIDS Healthcare Foundation, raised nearly $48 million, while opponents, including the California Apartment Association, raised almost $125 million.

It failed by 61%-39%.

“It’s a disappointing loss, and I don’t think it actually means that people in California and across the country don’t want affordable housing,” said Chris Melody Fields Figueredo, executive director of the Ballot Initiative Strategy Center, a liberal-leaning advocacy group. “A lot of money was put into defeating Prop 33, and there was a lot of misinformation that was given to voters about what rent control actually does.”

California voters have shown repeatedly they understand that rental control can limit housing supply and hurt affordability, said Stijn Van Nieuwerburgh, a real estate and finance professor at Columbia University. The better approach, he said, is for government to shorten the time it takes to build housing by streamlining permitting and land use approvals.

“Rent burdens have increased everywhere in the country, and renters are clearly frustrated by the rising cost of housing,” he told Stateline in an email. “The best way to improve the situation is to build more housing.”

Elsewhere in California

Despite the failure of Proposition 33, other statewide tenant protections still exist in California. Under a 2019 statewide law, landlords are limited to annual rent increases of no more than 10% on most properties over 15 years old.

California rent prices continue to outpace wages, however, and advocates say that landlords and developers can and have skirted the 2019 law.

According to a recent Stateline analysis, 56% of California tenants spend at least 30% of their income on housing, a situation known as being “cost burdened.” It’s the fifth-highest rate in the country.

And since the COVID-19 pandemic, the deficit of affordable housing has deepened nationally, with rental prices up 26%, according to the Joint Center for Housing Studies of Harvard University.

Alvarado, of the industry group, argued that Proposition 33’s failure doesn’t represent a rejection of all affordable housing efforts in the state but reflects a divisive issue in an ideologically diverse state.

“California is more than just Berkeley and San Francisco, and voters sent a clear message on a statewide level,” she said. “While Prop 33 failed, affordable housing measures at the local level are still advancing.”

On the same day Californians rejected the rent control measure, Los Angeles County voters raised their sales tax half a penny to fund affordable housing and address the homelessness crisis there.

“Those who opposed Proposition 33 were looking for alternatives to fix the affordable housing problem — even if it costs money — without constraining development,” Alvarado said.

Ultimately, many developers and investors in California see Proposition 33’s defeat as essential for housing development in the state.

Edgar Khalatian, a prominent Los Angeles real estate attorney, argued that repealing the state’s Costa-Hawkins Act could have had a chilling effect on construction, especially in anti-development municipalities.

“My read on the consequence of the vote is that housing will be built in California,” he said in an interview. “Anti-housing municipalities were preparing their rent control ordinances, which would have made development unfeasible.”

Khalatian said local requirements and price controls can drive up housing costs — and not just for developers.

“People don’t realize it’s not the developer that ultimately pays for added expenses or delays — it’s the tenant,” he said. “If the project becomes too expensive to build, it simply doesn’t get built.”

‘The path forward is local’

Proponents of rent control, such as Fields Figueredo, believe efforts to cap rent increases should continue at the local level, where they have had success.

Since January 2021, states and localities across the country have implemented more than 300 new tenant protections, according to the National Low Income Housing Coalition, a nonprofit that pushes for housing affordability.

This year, voters in Old Orchard Beach, Maine, voted for rent control on mobile homes. And in a landslide, Hoboken, New Jersey, voters rejected a proposal that would have scaled back current regulations for raising rent on rent-controlled apartments in the city.

Since 2016, more than 25 local rent control ballot measures have been proposed in 18 jurisdictions in California, with roughly half gaining approval, according to a Stateline review.

Proposition 33’s failure blocked a proposed San Francisco ordinance that was tied to the measure’s passage. The ordinance would have expanded rent control protections beyond buildings constructed before 1979, but it was contingent on a statewide repeal of Costa-Hawkins’ restrictions.

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In Berkeley, though, 52% of voters approved a tenant protections measure that, among other provisions, includes a rent increase cap of 5%. And Santa Ana voters overwhelmingly approved a rent stabilization ordinance that also requires landlords to have a just cause to terminate a lease.

“The path forward is local,” Fields Figueredo said. “Local rent control efforts allows for deeper conversations with residents, while statewide ballots tend to scatter the messaging.”

But voters in some parts of California still resist municipal rent control efforts. Voters in three Marin County cities rejected ballot measures that would have enacted or expanded rent control ordinances in their communities.

Fairfax voters repealed rent control and renter protections that the town council passed in 2022. In Larkspur, voters rejected new tenant protections and an expansion of a rent control ordinance that was upheld in March. And in San Anselmo, voters rejected two measures: one that would have enacted a rent control ordinance, and another that would have penalized landlords who own at least three dwellings for ending a tenancy without finding fault.

Stateline is part of States Newsroom, a national nonprofit news organization focused on state policy.

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