Proposition 10 will be on the California ballot in November, and it could have some serious impact on rent prices in San Diego County and throughout the entire state. It’s important to understand what this proposition is all about.
About the Local Rent Control Initiative Proposition
This new proposition is also known as the “Local Rent Control Initiative,” and it essentially will repeal a 1995 law that limits local governments’ ability to slow rent hikes. This original law is known as the Costa-Hawkins Rental Housing Act. It basically bans caps on rent increases for all single-family homes and condos, as well as apartment buildings that were constructed after 1995.
San Diego and Poway are two local cities that do not currently have rent control laws in place. Local lawmakers would still have to approve any localized rent control initiatives, but the new statewide law outlined in this proposition would definitely force the hands of all local governments when it comes to rent increase limits.
The Impact of Rising Rental Prices
The truth is that rent prices have really gotten out of hand throughout California, and especially here in San Diego County. Norm Miller is the Ernest W. Hahn Chair of Real Estate Finance at the University of San Diego School of Business. He believes rent should only represent about 25-30 percent of people’s income. However, it is actually approaching 40-50 percent for more than 30 percent of Californians.
“The rent increases we’ve seen in the last several years are rare,” Miller said.
The Pros and Cons of Rent Control
More stringent rent control practices could dramatically slow down the turnover in rental units. The current average for tenants to move out is roughly 1.5 years. This may be better for renters—at least financially speaking—who wish to stay in their leases for longer periods.
However, there are also negative effects of rent control to consider. Landlords are less likely to take care of their properties when rent increases are limited. This leads to faster deterioration of the units. Landlords may also discriminate a lot more when selecting tenants. They are more likely to want people who will probably move out faster rather than someone who is going to stay put for many years. This way, they can raise the rent price more often between tenants.
It could also slow down development of apartment buildings. There are many regulations already placed on developers and rent control laws could prevent even more of a hindrance if investors are worried about rent prices (and thus profits) being limited.
The fear with this proposition is that it is a short-term fix to the current problem of unusually high rental rates. “Those proposing have good intentions,” Miller claims, “but are not thinking long term.”
Know Before You Vote
Miller’s comments are just one perspective on this issue, so it is important to do your own research before voting this fall. Either way, the idea of rent control will continue to be a major topic in the real estate industry as home prices continue to rise.
Many renters are seeing this as an opportunity to get off the fence and buy real estate while interest rates remain relatively low. It’s a good time to explore your options and see what makes the most sense financially.
If you have questions about buying a home in today’s market or want to get started on your mortgage application, call Transparent Mortgage today at (619) 929-1099.