Prop 10 Appears Likely To Fail, But Demand For Rent Control Will Continue To Shape Multifamily

November 5, 2018 | Allison Nagel, Bisnow
MBH Architects' Tom Pflueger, Lennar Multifamily Communities' J.J. Abraham, AGI Avant's Eric Tao, Trammell Crow Residential's Bruce Dorfman and Sonder's Arthur Chang
Those in the multifamily sector anticipate the failure of Proposition 10 — the ballot measure that would make it possible for cities to once again set their own rent-control limits — but they worry that the issue will just raise its head again in some other form.

That is why, though developers, property owners, investors and others have actively fought against the measure, many of them also want to have discussions about what the future of rent control means in the state. If such decisions are going to sit in the hands of the state legislature or return to voters in the coming year, multifamily CRE leaders want a seat at the table.

"It's not going to go away," AGI Avant Managing Executive Principal Eric Tao said at Bisnow's Multifamily Annual Conference in San Francisco last week. "We all just want certainty. If we have certainty, we can plan for it."

Tao said he hoped this would be a wake-up call in Sacramento that would lead to some real legislation.

Proposition 10 would repeal the Costa-Hawkins Rental Housing Act, which was put in place in 1995. Under Costa-Hawkins, cities are kept from putting rent control measures on single-family homes, condominiums and apartments built after 1995. Landlords can move rent-controlled apartments to market-rate rents when a previous tenant moves out and a new tenant moves in.

Ever since the measure hit the ballot, those in the industry have funded and supported a campaign to educate voters about the flaws in Prop 10, which they argue would create a disincentive for new investment in and development of market-rate housing in the state — making the state's housing shortage worse and less affordable.

That campaign appears to have paid off, based on some poll numbers that J.J. Abraham, divisional president for California for Lennar Multifamily Communities, shared at the event. He worked on the committee to combat the proposition.

"We've come a long, long way," Abraham said.

The poll found that 60% of voters were against Prop 10, 25% were in favor and the rest were undecided (statistics that drew applause from the crowd). Of those voters polled, 80% recognize Prop 10.

Those who have already voted by mail, 36% of voters, have skewed strongly against Prop 10, with 57% against and 28% in favor. But, Abraham noted, 56% of voters said they were still in favor of rent control.

"We still have an issue," he said. "The committee has done a good job. We had to come a long way ... in educating people on how this is bad for the average renter, but that doesn't mean they don't want affordable housing."

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