In addition to going to the polls Tuesday and picking a new governor, lieutenant governor, a host of new members of the House of Representatives, and re-electing one of their two senators, California voters also soundly defeated a push to increase rent control in the state.
On Tuesday, voters in California voted down Proposition 10, which would have repealed the Costa-Hawkins Rental Housing Act. The Costa-Hawkins Act, which was passed in 1995, limits the use of rent control in the state.
Proponents of Prop 10, which included the California Democratic Party, the California Nurses Association, the California Teachers Association, and the ACLU of California, said that the measure would give cities the ability to establish rent control, thereby protecting renters against the significant affordability issues currently plaguing the Golden State.
But despite strong support from those groups and others, the measure was defeated by a nearly 2-to-1 margin. According to the California Secretary of State, 61.7% of the voters voted against repealing Costa-Hawkins, while just 38.3% voted for it.
According to CNBC, the fight over the measure brought in serious cash from both sides.
More than $100 million was spent on the fight over Proposition 10, with opponents spending more than $76 million and backers shelling out about $26.2 million, according to state campaign finance records. The real estate industry, including major landlords operating in California, led the fight against the measure by donating significant amounts of money.
A PAC affiliated with the California Association of Realtors contributed about $8 million to fight the ballot measure while more than $5 million apiece came from New York-based real estate private equity firm Blackstone Property Partners, Chicago-based apartment real estate investment trust Equity Residential, and Essex Property Trust, a California-based real estate investment trust.
While the measure’s supporters surely view the defeat as a setback in the fight over the state’s housing issues, an analysis from UBS argues that the proposition losing is actually the best thing for all involved.
“We view the defeat of Proposition 10 as a positive for a number of California constituents including landlords, the construction industry and tenants,” UBS Real Estate and Lodging Analyst Jonathan Woloshin said in a note.
“Although it might seem counter-intuitive to declare tenants winners following the defeat of a rent control initiative, we believe the potential for broader statewide rent control would have significantly limited new construction, thus further exacerbating the current lack of affordable rental housing,” Woloshin continued.
“This likely would have led to a scarcity value premium for existing buildings,” Woloshin concluded. “In addition, it is possible that the repeal of Costa-Hawkins could have led owners of rental units to convert their properties to condos or other forms of ownership, thus further shrinking the rental pool.”