PROPS. 5, 10: A LITTLE HELP FOR THE HOUSING CRISIS?

CALIFORNIA FOCUS
FOR RELEASE: FRIDAY, OCTOBER 26, 2018, OR THEREAFTER

BY THOMAS D. ELIAS

     “PROPS. 5, 10: A LITTLE HELP FOR THE HOUSING CRISIS?”

          All across California’s political spectrum, agreement is solid that this state suffers from a significant housing crisis – one of both affordability and supply.

          But there’s little agreement on what to do about it. Some politicians push for massive building within existing cities, especially near rapid transit stops and the most frequently used bus routes. Others suggest that almost half of all newly-built housing should fall into the “affordable” category with income limits on buyers.

          One thing for sure: steep rises in the price of existing homes make it hard for all but the wealthiest people in the under-40 age categories to buy, especially in coastal counties where increases have been highest. At the same time, rents in many cities are so high that a majority of households in some counties devote half their income or more to housing costs.

          Two propositions on the November ballot now enter this fraught area, one allowing vast expansion of the rent controls now operating in 15 California cities, including Los Angeles and San Francisco. The other expands the right of homeowners over 55 to transfer existing property tax valuations to any replacement house or condominium they might buy.

          Rent controls have been sharply limited since the late 1990s by the Costa-Hawkins Rental Housing Act, named for two state legislators of that time.

          Costa-Hawkins greatly eased strict controls in cities like Santa Monica, Cotati and San Francisco. Yes, rent controls there still apply to apartments (most local laws do not cover rented single-family houses) so long as they remain occupied by the same persons. But when renters move out, prices can rise to market rates, often doubling or more when longtime residents move on. The original ordinances kept strict controls in place even when vacancies occurred.

          Under those original laws, many landlords neglected maintenance: paint peeled, plumbing deteriorated and stucco cracked without being repaired because landlords felt their profits were too thin. Tenants often had to do the repairs.

          Costa-Hawkins gave landlords relief, but led to widespread under-the-table sublets, with original tenants re-renting to others at rates far below what an open market would allow. At the same time, many tenants who rented when quite young grew older and wealthier, but clung to their low-cost units for decades, a form of welfare for the middle class. Few studies measure these phenomena, in part because researchers find it hard to get honest information.

          Still, rent controls allow many to stay in prime areas they otherwise could not afford. Expanding vacancy controls, as Prop. 10 would allow where cities choose to do it, might slow the high-rent tide.

          Prop. 5 would affect housing very differently. Current laws, adopted a decade or so after passage of the landmark 1978 Prop. 13 property tax limits, allow homeowners over 55 to carry their current tax valuations (1 percent of the latest purchase price or the 1975 value, plus a 2 percent increase each year) to a replacement home of equal or lesser value within their own county. But only 10 of the 58 counties allow this benefit to cross county lines.

          One result is that realtors report at least 70 percent of over-55 homeowners have not moved in 17 years. By contrast, the Rand Corp. reported in the 1970s that the average Californian moved every seven years.

Less movement by older homeowners cuts the ability of younger families to move into larger, established homes often owned by seniors. What’s more, several counties that once participated in the tax benefit transfer program – Contra Costa, Marin and Monterey – pulled out because they believed they lost property tax money.

          That concern leads most public employee groups, including the state sheriff’s association and teachers’ unions, to oppose Prop. 5.

          But realtors backing it say it could free existing housing for homeowners wanting to move up in price category who now find it difficult to find homes for sale. That, in turn, could open more starter homes for young buyers. If more homes come on the market, realtors argue, prices may drop and ease the affordability problem.

          Taken together, these measures have the potential to create some movement at last on a problem area that’s been essentially frozen for decades.

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    Email Thomas Elias at tdelias@aol.com. His book, "The Burzynski Breakthrough: The Most Promising Cancer Treatment and the Government’s Campaign to Squelch It," is now available in a soft cover fourth edition. For more Elias columns, visit www.californiafocus.net