A statewide ballot measure that would repeal the Costa-Hawkins Rental Housing Act -- and return extreme forms of rent control to California — will appear on the Nov. 6 ballot as Proposition 10.

The proposition would hurt owners of rental housing throughout California. It would extend rent control laws to single-family homes, institute vacancy control, and cost taxpayers tens of millions of dollars in lawsuits.


The California Apartment Association is pleased that the State Building and Construction Trades Council of California, one of the most powerful labor groups in the state, has joined several other important statewide organizations in voicing opposition to Proposition 10.

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SAVE COSTA-HAWKINS

Serving the rental housing industry:

from single family rental owners to apartment communities

Californians For Responsible Housing

A project of the California Apartment Association

NO on Prop.10

Repealing the Costa-Hawkins Act would bring extreme versions of rent control back to California.

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CAA, FPI Management and REALTORS have warned lawmakers that repealing Costa-Hawkins would worsen housing crisis.

“... a recent Stanford study of San Francisco's rent control regime found that, far from helping people with less money, the policy makes their housing problems worse. So why, if there is such broad consensus about rent controls negative impacts on housing and a recent academic study confirming that do politicians find it so tantalizing? Fundamentally human beings understand that when there a very few of a thing and a lot of people want that thing, they will pay more for it, and that means the price will go up.” 

Roger Valdez, director of Seattle For Growth, in a column for Forbes

California cities that enforce rent control

Although communities across the country have removed old heavy-handed rent control policies, more than a dozen California cities continue to enforce rent control on multifamily housing:

California cities enforcing rent control on apartments:

  • Alameda
  • Berkeley
  • Beverly Hills
  • East Palo Alto
  • Hayward
  • Los Angeles
  • Los Gatos
  • Mountain View
  • Oakland
  • Palm Springs
  • Richmond
  • San Francisco
  • San Jose
  • Santa Monica
  • West Hollywood
  • * Thousand Oaks (program being phased out)

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Lawmakers want to bring back

RADICAL FORMS OF RENT CONTROL.

What does the Costa-Hawkins Rental Housing Act do?

The Costa-Hawkins Act protects property owners of all sizes from radical, local rent control measures. This protection prevents local governments from regulating and setting rents on single-family homes, individually owned condominiums and townhouses. The act also requires all rent control ordinances to allow a rental property owner to set the rent at market rate once a tenant moves out and a new tenant moves in, a policy known as vacancy decontrol. Additionally, the Costa-Hawkins Act prohibits local governments from regulating the price of rents on rental units built after 1995.

Understanding the Costa-Hawkins Rental Housing Act

Q&A:

How does the vacancy decontrol provision of Costa-Hawkins protect landlords?

The Costa-Hawkins Act bans vacancy controls, a form of extreme rent control found in cities such as San Francisco and Santa Monica in the 1980s. When vacancy controls are in place, owners of rent controlled housing are forever prohibited from resetting rents to market rates, even after changes in tenancy. Under the vacancy decontrols brought by Costa-Hawkins, however, landlords can look forward to the eventuality of bringing rents to market levels, even in rent controlled cities.

How does the Costa-Hawkins Act protect small owners?

The Costa-Hawkins Act prohibits rent control on single-family homes and individually owned condos. These types of units are common investments among independent rental owners and often supplement fixed incomes during retirement. Applying rent control would impose a complicated bureaucracy on small owners and undercut their ability to reap the financial rewards of property ownership.

My city doesn’t have rent control. Why should I care about the Costa-Hawkins Act?

In today’s political climate, all communities are vulnerable to rent control, which has emerged as a popular

approach to address rising rents. In 2016 and 2017, CAA fought rent control ballot measures in seven

Northern California cities. While CAA defeated rent control in most jurisdictions, rent control won passage

in two municipalities: Mountain View and Richmond. Efforts are now underway to place rent control before

voters in several cities in the Los Angeles region, and tenant groups continue to pursue rent control measures

in Northern California. Under current market conditions, the threat of rent control looms in every corner of

California. A repeal of Costa-Hawkins would energize tenant groups and propel their movement to spread rent

control statewide.

What rent control does

Rent control creates a stagnant market.

As household incomes naturally increase, renters in a rent-controlled environment are incentivized to stay put, even if they’re making well over $100,000 a year. These tenants move at a rate three times less often as renters in non‐rent controlled units.

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When government places an artificial control on rent, property owners are not able to adjust rents to accommodate increased costs or unexpected circumstances, and properties deteriorate.

Rent control reduces the quality of rental housing.

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Although people think rent control will lead to lower rents, the opposite is true. The rents of available apartments in rent-controlled cities are dramatically higher than rents in cities without rent control. In cities without the policy, available units run the gamut from low‐priced to high‐priced. In rent-controlled cities, the only units available are the highest priced, far above the median rent.

Rent control ordinances lead to higher rents.

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In many rent-controlled communities, prospective consumers must pay substantial finder’s fees to obtain a rental unit, due to the scarcity of available housing. And, in some rent‐controlled areas, a “gray‐market” in rental housing has developed in which units are passed among friends or family members, or new consumers may be required to pay “key money” or to make other payments to current consumers to obtain housing. Sub‐leasing is common in rent‐controlled cities.


Rent control means expensive consumer entry costs.

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Rent control erodes the life savings of people who have invested their money in real estate.

Most people who work in real estate do not have traditional retirement plans. Their lifelong retirement savings are generally invested in what they know best, real estate. Rent control ordinances that prohibit property owners from asking for market-rate rents unfairly steal from the retirements of real estate professionals.

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Rent control creates substantial administrative costs.

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The administrative costs of rent control can be substantial. Rent controls require the creation of convoluted bureaucratic systems. Rental property must be registered, detailed information on the rental property must be collected, and complex systems for determining rents must be created, and processes for hearing complaints and appeals must be established. In Santa Monica in 1996, the Rent Control Board had a budget of more than $4 million a year to control rents for only 28,000 units.

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Plummeting values adversely impact schools and city services. As home and apartment values decline, revenue from the county also declines. This jeopardizes the long-term health of schools and city infrastructure such as police, fire, and other services.

Rent control artificially destroys home and apartment values.

California’s attorney general has issued a title and summary for a ballot measure that would overturn the Costa-Hawkins Rental Housing Act. 

In a column published by Bloomberg, Noah Smith writes that rent control does more harm than good and that better options exist for helping vulnerable renters. Smith also quotes Swedish economist Assar Lindbeck, who said that rent control is “the best way to destroy a city, other than bombing.” [Bloomberg]

Repealing the Costa-Hawkins Rental Housing Act would trigger “extreme versions” of rent control throughout the state, said Tom Bannon, CEO for the California Apartment Association. “It’s a disincentive for the construction of new, multifamily housing,” Bannon said. [Sacramento Bee]

In an opinion piece for the Sacramento Bee, Erika D. Smith characterizes rent control as “an imperfect, blunt-force policy tool that could very well make the housing crisis worse by shrinking supply.” [Sacramento Bee]

In the news >>

On Monday, April 23, signatures were submitted to qualify an initiative for the November 2018 ballot that would hurt owners of rental housing throughout California.


The Housing Freeze would repeal the Costa-Hawkins Rental Housing Act, opening the door for permanent price caps on what owners can charge for rent on their properties. The California Apartment Association encourages its members to sign up today to join the campaign opposed to this initiative.


The Housing Freeze’s sponsor, Michael Weinstein, has an extensive history of fighting against new housing and opposing renters. He has spent more than $2 million to put this initiative on the ballot and will likely spend millions more to pass it. CAA members will be critical in defeating this measure.


Signatures submitted to qualify Housing Freeze for November ballot

Learn more about the campaign to defeat the Housing Freeze at at NoHousingFreeze.org.

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About CAA

The California Apartment Association is the nation’s largest statewide trade group representing owners, investors, developers, managers and suppliers of rental homes and apartment communities

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For more than 75 years, we have served rental housing and apartment owners and managers in California. We are proud to be the definitive voice of the single and multifamily housing industry in California.

Serving the rental housing industry:

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apartment communities

In an editorial titled “The magical thinking that is rent control,” the Pasadena Star-News says that AB 1506, a bill to repeal the Costa-Hawkins Act, failed to advance in the Assembly after most committee members “were able to see through the superficial appeal” of the legislation. “Ultimately, rent control is a poor substitute for allowing markets to work and removing artificial barriers to more housing construction,” the editorial says. [Pasadena Star-News]

How the Costa-Hawkins Rental Housing Act came about

In 1995, the California Legislature passed and the governor signed Assembly Bill 1164 – a law known as the Costa-Hawkins Rental Housing Act.


While cities and counties continue to maintain the ability to implement local rent control laws, they must follow the parameters established in the Costa-Hawkins Act.

This law was intended to provide a moderate approach to the otherwise extreme vacancy control ordinances in place during the 1980s in Berkeley, Santa Monica, Cotati, East Palo Alto and West Hollywood.


Costa-Hawkins did so by clearing the way for owners in rent controlled communities to establish initial rental rates when there was a change in occupancy at a dwelling unit – a policy known as vacancy decontrol.


To protect a tenant from an owner’s arbitrary eviction, the state law also includes provisions that govern the change in terms of tenancy and thereby the owner’s ability or inability to raise the rent.

At the heart of Costa-Hawkins are a number of basic rules:

  1. Housing constructed after 1995 must be exempt from local rent controls
  2. New housing that was already exempt from a local rent control law in place before Feb. 1, 1995, must remain exempt
  3. Single-family homes and other units like condominiums that are separate from the title to any other dwelling units must be exempt from local rent controls
  4. Rental property owners must have the ability to establish their own rental rates when dwelling units change tenancy.

For specific wording, see the California Civil Code, beginning at Section 1954.50.

Studies About Rent Control

Links to studies on rent control and other housing-related issues:

Paid for by No on Prop 10; Californians for Responsible Housing, A Coalition of Veterans, Seniors, Housing Providers, Social Justice Groups, Taxpayer Associations, and Labor. Committee Major Funding from Essex Property Trust, Inc., and Affiliated Entities; Equity Residential; and AvalonBay Communities, Inc.

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An Analysis of Rent Control Ordinances in California

Beacon Economics, 2016


Among the key points:

  • Fewer apartments are built: The presence of a rent control policy in a city is associated with a 10.12 percentage-point reduction in the growth of rental housing from 2000 to 2013.
  • Los Angeles feels the pinch: The research implies that from 2000 to 2013 growth in the number of renter occupied units in the city of Los Angeles was deprived of an additional 79,136 units due to the presence of rent control.

Beacon Economics, 2016 

To help California’s low-income families secure housing, elected officials should focus more on encouraging private residential development and less on existing government programs that subsidize construction or impose rent control, the Legislative Analyst’s Office says.

  • Reduced income: “By depressing rents, rent control policies reduce the income received by owners of rental housing,” says the document.  
  • Decline in quality: “In response, property owners may attempt to cut back their operating costs by forgoing maintenance and repairs. Over time, this can result in a decline in the overall quality of a community’s housing stock.” 


Legislative Analyst’s Office, 2016 

The study aimed to review the impact of restrictive rent control on several population and housing issues, comparing objectives with results. The study concentrates on cities that had restrictive rent control, because it is in these cities that the intent of the ordinances may not meet their intended goals. The 1980 and 1990 Census were compared to ascertain the percentage change between Berkeley and a reference county, Alameda; and Santa Monica, and its reference county, Los Angeles.


Among the key points:


  • Lost units: Both Berkeley and Santa Monica lost rental housing units (single-family detached and attached units) while their neighboring counties added to their rental housing stock. Both cities lost structures with five or more units, while their neighboring counties gained this type of housing.
  • Lost rooms: Both Berkeley and Santa Monica showed declines in renter occupied rooms while their neighboring counties gained renter-occupied rooms. Both cities and both counties gained owner-occupied housing.
  • Age-based bias: Rent ordinances have caused biases against certain age groups. The data indicates that family composition may be affected as the number of persons in their early child-bearing years is declining in both cities. Despite the rapidly aging society, the elderly population is either declining or barely increasing in both cities, while in their neighboring counties, the elderly population is increasing rapidly.
  • Gentrification: Overall, lower income renters declined in both cities. Gentrification (that is, the displacement of lower economic and educational status renters by high economic and educational status owners) is occurring in both cities. The two restrictive rent control cities have become increasingly inhabited by higher-income, higher-education home owners since rent control was adopted.


Real Estate & Land Use Institute, 1994

Among the key points:


  • Owners Convert Rental Housing: This report finds that landlords actively respond to the imposition of rent control in San Francisco by converting their properties to condos and tenancies-in-common or by redeveloping the building in such a way as to exempt it from the regulations.
  • Reduction of Rental Housing: Overall, the rental housing supply in San Francisco reduced by 15 percent. This led to a city-wide rent increase of 7 percent and caused $5 billion of welfare losses to all renters.

Rebecca Diamond, Tim McQuade & Franklin Qian, October 2017

This paper reports on research using 1980 and 1990 Census data to examine the demographic impacts of the restrictive rent control programs in effect in Berkeley and Santa Monica throughout the 1980's.


Among the key points:


  • Reduces Rental Housing Stock: The study demonstrates that these programs were associated with a reduction in the stock of rental housing of more than 10 percent in Berkeley and Santa Monica over the decade.

  • Harms Low-Income Families: In Berkeley and Santa Monica, significant reductions in the numbers of persons and households in the groups it was intended to help: low-income households, college students, elderly persons, families with children, and disabled persons. By contrast, the number of very-low and low-income households increased in virtually every comparison community.

  • High-Income Earners Benefit More: Tight and shrinking housing markets created during periods of restrictive rent control seem to favor economically advantaged individuals and households.
  • Promotes Gentrification: The evidence suggests that rent control (along with growth control, down-zoning, “neighborhood preservation” laws, and eviction control) promotes accelerated gentrification.

  • Harms Economically Disadvantaged Households: The evidence seems to indicate that restrictive rent control programs contain significant biases against the interests of many of the same groups formally targeted for assistance by the legislation.

St. John & Associates, 1993

  • Elimination of Rent Control Added Value to Housing: Rent control's removal in Cambridge produced large, positive, and robust spillovers onto the price of never-controlled housing from nearby decontrolled units. 
  • Added $1.8 Billion to Housing Values: Elimination of rent control in Cambridge added about $1.8 billion to the value of Cambridge's housing stock between 1994 and 2004, equal to nearly a quarter of total Cambridge residential price appreciation in this period. Positive spillovers to never-controlled properties account for more half of the induced price appreciation. 

David H. Autor, Christopher J. Palmer, Parag A. Pathak

Working Paper 18125 - National Bureau of Economic Research, June 2012


  • Rent Control is Not Efficient: A preponderance of the literature points toward the conclusion that rent control introduces inefficiencies in housing markets.
  • Does not Provide Redistribution as Advocates Promise: The literature on the whole does not sustain any plausible redemption in terms of redistribution.
  • Harms the Economy: While temporary price freezes might be beneficial under certain extreme situations, such as during wartime when rent controls provide a way to ration housing without imposing undue hardship, long-term rent freezes are undoubtedly harmful to economies.
  • Reduces Tenant Mobility: The one clear impact that all rent control regulations will have is to reduce rents for some groups of existing tenants and create a wedge between their housing costs, if they stay in their existing unit, and their housing costs if they move. This wedge has been found to severely reduce mobility.
  • Creates More Problems than it Solves: The economics profession has reached a rare consensus: Rent control creates many more problems than it solves.

By Blair Jenkins - Eco Journal Watch, Vol 6, Number 1 January 2009, pp 73-112

Among the key points:


  • Rent Control Would Decrease Home Values: Imposing rent control on single-family homes would significantly reduce rental income potential for these small-scale owners, and thereby decrease the value of the underlying properties for these businesses.
  • Rent Control on Single-Family Homes Would Incentivize Conversions: As a result, many mom-and-pop property owners would be incentivized to hold units vacant, move into the unit themselves, put less profitable homes up for sale, or even exit the rental business by converting homes from rentals to owner-occupied properties. 
  • Rent Control on Single-Family Homes Would Hurt Tenants: Ultimately, extending rent control to include single family homes would be a threat to the very group that rent control advocates hope to help – the large number of families who rely on renting single-family homes as their only viable housing option. 

Kenneth Rosen, UC Berkeley, Fisher Center for Real Estate and Urban Economics, October 2018

Among the key points:

  • Property Converted to Other Uses: Rent control incentivizes property owners to convert rental units to other uses; such as for-sale housing units or non-residential buildings. 
  • Inefficient Allocation: Rent control reduces the effective supply of available rental units through an inefficient allocation of housing. 
  • Discourages Development: Rent control limits the creation of new rental supply by discouraging development activity.   

Kenneth Rosen, UC Berkeley, Fisher Center for Real Estate and Urban Economics, September 2018

Among the key points:

  • Less Tax Revenue: Potential net reduction in state and local revenues of tens of millions of dollars per year in the long term. Depending on actions by local communities, revenue losses could be less or considerably more.
  • Economic Effects: If communities respond to this measure by expanding their rent control laws, it could lead to several economic effects. The most likely outcomes include: To avoid rent regulation, some landlords would sell their rental housing to new owners who would live there. The value of rental housing would also decline because potential landlords would not want to pay as much for these properties. 

The California Legislative Analyst’s Office, November 2018