The Costa Hawkins Rental Housing Act was enacted by the California legislature in 1995 to significantly change rent control laws. The legislature decided to bring Costa Hawkins to the legislature because of serious concerns over housing affordability, tenant protections, and the balance between landlord and tenant rights in California.
Proposition 33 was placed on the ballot in the 2024 election to modify or repeal parts of the Costa Hawkins Rental Housing Act. Initiatives to amend Costa Hawkins have come about because of brewing tensions in California’s housing market over the need for affordable housing solutions.
California Votes No on Prop. 33
In December, 60% of voters opposed the measure, while 40% supported it. The final results were certified on Dec. 13 with nearly 15 million ballots tallied. Proposition 33 would give local governments significant power to set rent controls.
The California Voter’s Guide states that Proposition 33 would have caused a “reduction in local property tax revenues of at least tens of millions of dollars annually due to likely expansion of rent control in some communities.” These California cities currently have some form of rent control: Los Angeles, Oakland, West Hollywood, Santa Monica, and Berkeley.
What Is Prop. 33?
Under the current law, landlords in California have the freedom to charge however much money they want for rent when a new tenant moves into their property.
Proposition 33 asks California voters to support more affordable housing by making it easier for cities and counties to limit how much a landlord can charge a tenant for rent. The ballot measure repeals state law that restricts the ability of cities and counties to impose rent control.
Officially known as the “Justice for Renters Act,” Proposition 33 marked the third attempt to repeal the Costa-Hawkins Rental Housing Act and impose rent control policies.
Why Prop 33 Matters in San Diego
There are approximately 17 million renters in California, of which 55% are rent-burdened, paying more than 30% of their income on rent. San Diego has the seventh-highest monthly rent in the entire country, coming in at an average of $2,798. For reasons like this, lawmakers thought it necessary to put Prop. 33 on the ballot in November 2024.
The arguments against Prop. 33 are that the measure could overturn more than 100 state housing laws, some of which make it easier to build affordable housing. Economists and housing experts at Stanford and UC Berkeley claim that Prop. 33 will make California’s housing crisis worse by reducing the construction of new affordable housing. This could make it harder to become a homeowner and increase rental demands and prices in San Diego.
What If Prop. 33 Passed
If Prop. 33 in San Diego passed, it would have allowed cities and counties to impose rent caps on single-family homes and newly constructed apartments. It would have allowed rent restrictions to stay in place even during tenant turnover.
Challenges and Considerations
Opponents of Prop. 33 said that if cities adopt strict rent control ordinances, it will make the housing shortage in California even worse. They argue that with this proposition, developers will not build new housing, and property values will drop, driving up prices in existing rental units.
What critics want to know is does this measure really protect renters.
Potential Limitations of Prop. 33
Proposition 33, also known as the Costa-Hawkins Rental Housing Act, has several criticisms and challenges associated with it.
The proposition exempts certain types of homes from rent control, which is limiting for the tenants it is trying to protect. For example, single-family homes and new-construction homes do not fall under Prop. 33.
By restricting rent control, a potential limitation is this act may contribute to a shortage of affordable rental units, causing housing affordability to become even worse in California. Prop. 33 would reduce the incentive to build new homes during a time when California, and especially San Diego, really needs new construction.
Prop. 33 Pros and Cons
The catalyst for bringing rent control onto the ballot is quite simply because rent is too expensive. Our first responders starting their careers need to pay half their salary to live in many cities throughout California. Supporters argue rent control works well in many cities to fight homelessness and displacement.
Those who are not in support of Prop. 33 in California have concerns that trying to enact rent control will negatively impact the ability to build affordable housing and drive up rents in areas not covered by rent control.
How Prop. 33 Affects Buyers and Sellers
Prop. 33 in California might seem like a good solution to the housing affordability crisis, but historically, rent control often reduces housing supply and increases housing costs for house buyers and sellers. Rent control has also been known to discourage investors and developers from building new homes. Experts who weighed in on Prop. 33 concluded that if Proposition 33 passes, California cities already struggling with limited housing will see even fewer homes built.
Proposition 33 in San Diego could also reduce property values. MIT research has shown that rent control can lower home values by 25%.
What’s Next for Rent Control
Residential landlords in San Diego must comply with rent cap laws, which limit how much rent they can increase annually. The maximum rent increase from August 1, 2024, to July 31, 2025, is set at 8.6%, which includes a base of 5% plus a 3.6% change in the Consumer Price Index.
There are also changes in security deposit laws that went into effect on July 1, 2024. According to California AB 12, security deposits must be limited to one month’s rent.
The Tenant Protection Ordinance that went into effect offers protections by limiting evictions to specific causes. This ordinance manages how landlords can adjust rents. For month-to-month leases, landlords in California need to issue 30 days’ written notice for small increases and 60 days for larger increases.
