Sacramento Report

California Housing Crisis: Part 3


Editor’s Note: This is Part 3 of a three-part article. Part 1 and Part 2 appeared in the May and June issues of the Apartment Journal.

VI. Local Governments Are Unaccountable and Stifling Growth.

Two statewide housing laws, the Housing Element law and the Housing Accountability Act (HAA), establish local governments’ responsibility to plan, promote, and remove barriers for housing development. The Housing Element law requires cities and counties to develop comprehensive plans every eight years to build new homes in their communities. The HAA was enacted to ensure local governments work to remove barriers to housing development through speedy development approvals and rezoning. Neither of the laws are respected or honored by local governments.

“We’re kind of lying,” said a Foster City councilmember about his city’s 87-page housing plan, which proposed hundreds of new homes.41 “We have no intention of actually building the units.” The councilmember’s prediction came true according to a recent LA Times article. “Despite soaring demand for housing in the Bay Area, the city hasn’t approved any new development projects in more than five years.”42

Foster City’s decision to ignore the housing element is pervasive among cities and counties throughout California. That’s because the housing element law has no teeth—it does not hold local governments accountable for any home building.43

State lawmakers have known about the law’s weaknesses for decades but haven’t fixed them. They have added dozens of new planning require ments to the process but have not provided any incentive, such as a greater share of tax dollars, for local governments to meet their housing goals.44

In addition to ignoring the housing element, local government housing decisions have made it even more difficult to build new housing.45

More than two-thirds of California’s coastal communities have adopted measures - such as caps on population or housing growth, or building height limits—aimed at limiting residential develop ment, according to the Legislative Analyst’s Office. A UC Berkeley study of California’s local land-use regulations found that every growth-control policy a city puts in place raises housing costs by as much as five percent there.”46

Cities are also bypassing their responsibilities under HAA by rezoning areas for commercial development over housing, and by modifying their zoning plans in ways that make housing infeasible.47

City and county inaction has become such a big problem that several bills from the 2017 housing package were necessary to stifle the ability of local governments to use zoning, environmental and procedural laws to thwart projects they deem out of character with their neighborhood.48

All in all, local governments are not holding up their end of the bargain to accommodate housing needs. Instead of adopting policies that facilitate the development of more housing units, they often target the rental housing industry for regulation, which in turn produces fewer housing units, and forces rental housing owners to remove units from the market.

VII. The High Cost of Development.

Development costs, land values, and permitting fees are soaring, making it more difficult for develop ment of rental housing to pencil out. One architect in 2014 conducted a study on the real cost to build a housing unit in San Francisco. According Mark Hogan, the costs are staggering.49

The following is his breakdown of the costs to build a San Francisco unit.50 Calculations are based on a 100-unit building assuming 800 square feet per unit, which is approximately 640 square feet of usable space based on typical building efficiency:

  • Land cost per unit of housing: $120,000
  • Construction cost per unit: $240,000 ($300 per sq. ft.)
  • Subsidy to build affordable housing below market: $27,000 (based on $200k per unit subsidy times 12, divided by remaining 88 units)
  • Permits, city fees and professional services: $48,000 (20 percent of $240,000)
  • Selling expenses: $34,000 (marketing, legal fees and real estate commissions at eight percent)
  • Total: $469,800 (total cost of 800 sq. ft. per unit)

It is no wonder rents are so high and housing is unaffordable. It is expensive to build. Rental property owners must charge higher rents to keep up with the cost of development.

The government again plays a significant role in the high cost of development. For one, its permitting and impact fees continue to rise. But more importantly, instead of providing incentives to offset the costs of development, the government continues to focus on burdening the rental housing industry with costly regulations.

If the State and local governments want to begin addressing the out-of-control development costs, it must give serious consideration to incentivizing development of new and afford able housing, including density bonuses, fee and permitting waivers, and CEQA waivers. Several recent studies have found that for every 10 percent increase in density reduces a project cost by up to 5.7 percent on average, and that for every 20 percent increase, the likelihood a site will be developed increases by 25 percent.51

Moreover, parking requirements can increase the cost of a housing development by 25 to 40 percent. One study found that reducing parking requirement by 20 percent increased the likelihood of housing being built by 87 percent.

Finally, waiving or reducing development impact fees as an incentive to build can help spur growth. In the Bay Area, impact fees can range from $24,000 – $40,000 per unit. Even a small reduction in the impact fees, or complete waivers depending on the number of affordable units provided within a development could yield big return in terms of housing development.


Instead of blaming and regulating the housing industry for the housing crisis, it is time for government to take a good hard look in the mirror and assess how its own actions and inactions over the last 50 years have significantly contributed to the crisis. Until the government can acknowledge that it is part of the problem, the State will continue to make the same mistakes over and over. It will continue to offer up the same problematic legislative measures, like Costa Hawkins repeal, that exacerbate rather than solve the State’s housing problems.

As California’s population continues to rise, its housing problems will continue to get worse unless real reflection occurs and real solutions are offered. It is time for the government to take responsibility for its actions and begin regulating and reigning itself in.

Ron Kingston can be contacted at This e-mail address is being protected from spambots. You need JavaScript enabled to view it

No portion of this article may be reproduced or copied without the permission of the author (Copyright © 2018 CALPCG).


41 Supra note 18 (article dated June 17, 2017).
42 Id.
43 Id.
44 Id.
45 Id.
46 Id.
47 Kevin Burke. “How Cities Bypass State Law, Causing the Housing Crisis.” The Bay City Beacon. August 2, 2017. Web January 2018.
48 See Sen. Bill 35 (Cal. Stat. 2017), Sen. Bill 167 (Cal. Stat. 2017); Adam Nagourney and Conor Dougherty. “The Cost of a Hot Economy in California: A Severe Housing
Crisis.” The New York Times. July 27, 2017. Web January 2018.
49 Mark Hogan. “The Real Costs of Building Housing.” The Urbanist. February 11, 2014. Web January 2018.
50 It does not include construction financing expenses, contingencies or developer’s profit, among other things.
51 Matthew Palm. “Getting the Most Out of California’s New Affordable Housing Funds.” The Bay City Beacon. December 5, 2017. Web January 2018.



California Housing Crisis: Part 2


Editor’s Note: This is Part 2 of a three-part article. Part 1 appeared in the May Apartment Journal and Part 3 will appear in the July issue.

III. Attracting Big Business Without Accounting for Big Housing Demand Is a Big Problem.

For years, local governments have been luring big businesses to their cities and counties through tax breaks and incentives, without equally investing in housing to meet demand. In San Francisco, for example, city leaders have successfully lured big tech companies like Twitter, Dropbox, Salesforce, Zendesk, Airbnb, Lyft, Uber, Pinterest, Yelp, and even Google to set up shop right in the heart of the City through tax breaks and other development incentives.15 Before that, in the early 2000’s, it was biotech companies. But while politicians have been successful in luring well-paying jobs in droves, they have failed, and miserably at that, to account for population growth and in creating or facilitating the development of housing to accommodate the city’s housing needs. By the numbers, the Bay Area has added half a million more jobs than housing units since 2011.16

Statewide tax break incentives pose similar problems. The State recently approved $91 million in tax breaks as part of the California Competes initiative, which provides incentives for 114 companies to bring jobs to various parts of California.17 Sounds great until the statewide job growth exacerbates California’s housing problems.

Then there’s government’s incessant fawning over Amazon. Almost every major city in America is competing for Amazon’s new headquarters (including, of all places, the San Francisco Bay Area). The bids that are being discussed are jaw-dropping.

Chula Vista, California, for example, has offered $100 million worth of property and 30 years of property tax breaks, with no plan to develop more housing to accommodate the influx of 50,000 new jobs.18

Fresno, California, however, might be on to something with its controversial yet novel Amazon proposal. It proposed no tax breaks, but promised to funnel 85 percent of all taxes and fees generated by Amazon into a special fund for housing and other infrastructure.19 The catch was that Amazon got a say in how the taxes were to be spent.

Regardless, Fresno’s “build to play”20 proposal was a reasonable one because it required the development of housing to be more or less commensurate with job and population growth.

Although Fresno’s proposal was ultimately rejected, the approach was noteworthy because it approached job recruitment and growth with housing in mind.

IV. “Local Control” Is Why Sacramento Will Be the Location of the Next Big Housing Crisis.

Local governments argue that repealing Costa Hawkins will give them back “local control” to address their own housing needs. It is these same governments that blame rental housing owners for housing affordability problems, which they argue justifies why they should have the power to rent control all rental property. In fact, “local control” means local governments can choose to neglect their housing responsibilities while taking actions that create housing affordability problems, and then blame property owners when affordability problems and housing short ages actually occur.

Take what’s happening in Sacramento as an example. Sacramento is the fastest growing city in California.21 It also has one of the hottest housing markets not just in California, but also in the country.22 On top of that, rents are rising faster in Sacramento than any other part of California;23 some say it’s the fastest in the nation.24 Housing supply is low, while demand is high, and the population keeps growing.

But how did Sacramento go from “cow town” to “wow” town.25 More importantly, what are city leaders doing about meeting Sacramento’s housing demands?

It is no secret that a mass exodus from the Bay Area to Sacramento is in full throttle.26 But Sacramento leaders have also been working overtime to offer tax breaks and incentives to attract new businesses to the region. Just recently, Sacramento agreed to give Centene, a health insurance company, $13.5 million to establish headquarters in Sacramento. Ironically, the money they are offering to Centene to produce jobs in the area comes directly from old redevelopment funds—funds that used to be reserved for affordable housing production! 5,000 jobs are expected to be generated from the deal.

Sacramento was also one of several hundred cities to offer incentives to Amazon to build a new headquarters and bring in 50,000 new jobs. In fact, local governments in the Sacramento area offered Amazon more than $500 million in job grants, land donations, and infrastructure financing to lure the online behemoth to the region. None of the proposals were tied to the development of new housing.

Blaming property owners for high rents, therefore, is misguided and misplaced, when city leaders are making decisions every day that exacerbate the housing shortage problem, while neglecting to to offer incentives to Amazon to build a new headquarters and bring in 50,000 new jobs. In fact, local governments in the Sacramento area offered Amazon more than $500 million in job grants, land donations, and infrastructure financing to lure the online behemoth to the region. None of the proposals were tied to the development of new housing.

The city has made numerous other recent decisions to grow the area without considering its housing needs. The city just built a new NBA arena for the Sacramento Kings. “[I]n the 26 months the complex was under development, $530 million in real estate transactions took place in a 10-block radius around the arena, more than 80 new businesses moved downtown, and neighborhood employment jumped 40 percent.”27 A rail yards project is in development,28 as well as discussions about a riverfront district project on both sides of the Sacramento River.29

Sacramento is also hoping to be the home of a new Major League Soccer team. Subsidies for hotels, a science museum, an aquarium, and a new convention center are also either in the works or being discussed.30

Mayor Darryl Steinberg has vowed to make Sacramento a center for jobs, and is unabashed in his bid to attract high-tech startups.31 City leaders have even changed Sacramento policy to allow staff members to offer financial incentives to large companies interested in relocating to the Sacramento area.32

This kind of city growth should be commensurate with big investments in housing development. But Sacramento is barely lifting a finger to require new housing development.33 It’s making the same mistakes the Bay Area made.

Blaming property owners for high rents, therefore, is misguided and misplaced, when city leaders are making decisions every day that exacerbate the housing shortage problem, while neglecting to contribute toward the development of new or affordable housing.

V. Rent Control Removes Units from the Market and Drives Up Costs.

According to a recent Stanford University study on the effects of rent control, there are 30 percent fewer rent controlled units in San Francisco than there were when rent control went into effect in 1995.34 "Rent control exacerbates the housing shortage by pushing landlords to remove supply of rental housing," Rebecca Diamond, author of the Stanford study, stated recently.35 The study goes on to show that for every six percent decrease in housing supply, rent prices increased by seven percent.36 The study is in line with previous reports, including by the American Community Survey in 2012, showing that San Francisco has a staggering 30,000 vacant units at any given time.37 Some owners keep units off the market while others convert their properties to ownership housing.38

Rent control proponents argue that these studies show that owners should be prevented from converting their properties to ownership housing and should be heavily taxed for keeping units vacant.39 But more regulation and burdensome controls over rental housing will only serve to squeeze more rental units out of the market while chilling development. The Stanford economists suggest government subsidies, tax credits, and building more affordable housing as workable solutions.40

Editor’s Note: This is the end of Part 2 of 3. Part 3 will appear in the July issue of the Apartment Journal.

Ron Kingston can be contacted at This e-mail address is being protected from spambots. You need JavaScript enabled to view it

No portion of this article may be reproduced or copied without the permission of the author (Copyright © 2018 CALPCG).


15 Marissa Lang. “Companies avoid $34M in city taxes thanks to ‘Twitter tax break.’” SFGate. Oct. 19, 2015. Web January 2018.
16 Liam Dillon. “California lawmakers have tried for 50 years to fix the state's housing crisis. Here's why they've failed.” Los Angeles Times. June 17, 2017. Web January 2018; see also Dillon. “What you want to know about California's failed housing affordability law.” LA Times. July 5, 2017. Web January 2018 (“Bay Area is adding hundreds of thousands more jobs than homes, which is driving up the demand for housing beyond what the targets had anticipated”).
17 Riley McDermid. “Here's what California paid to lure General Motors jobs to downtown San Francisco.” San Francisco Business Times. April 14, 2017. Web January
2018; see also Scott Olson. “Salesforce poised to receive city tax break on tower expansion.” Indianapolis Business Journal. August 2, 2016. Web January 2018.
18 Anna Hensel. “How 12 cities are trying to woo Amazon’s $5 billion.” Venture Beat. Heartland Tech Analysis. November 24, 2017. Web January 2018.
19 Id.
20 “Build to play” is hereby coined.
21 Randol White. “Sacramento Is Fastest-Growing Big City In California.” Capitol Public Radio. May 1, 2017. Web January 2018.
22 Linda Gonzalez. “Sacramento makes Zillow’s list of hottest housing markets for 2017.” The Sacramento Bee. Real Estate News. January 16, 2017. Web January 2018.
23 Angela Hart. “Rents are rising faster in Sacramento than any other part of California.” The Sac Bee. Capitol Alert. July 26, 2017. Web January 2018.
24 Josh Lyle. “Sacramento rents fastest rising in nation.” abc10. June 29, 2017. Web January 2018.
25 Patrick Sisson. “Sacramento, emerging from Bay Area’s shadow, becoming booming urban alternative.” Curbed. Property Lines, Real Estate. July 11, 2017. Web January 2018.
26 Erica D. Smith. “The Legislature did its part to fix Sacramento’s housing crisis. Now it’s your turn, Bay Area refugees.” The Sac Bee. September 19, 2017. Web January 2018; Katy Murphy. “Amid Bay Area exodus to Sacramento, low-income families at risk of being pushed out, study finds.” The Mercury News. November 22, 2017. Web January 2018.
27 Supra note 27.
28 Id.
29 Richard Chang. “Sacramento is either ‘unknown or misunderstood.’ Will that change in 2017?” The Sac Bee. Business & Real Estate. December 29, 2016. Web January 2018.
30 Ryan Lillis. “Big public subsidy coming for Sacramento riverfront museum.” The Sac Bee. City Beat. September 13, 2017. Web January 2018; Anita Chabria.
“Sacramento leaders OK convention center rehab – and want another tourist destination.” The Sac Bee. Local. May 30, 2017. Web January 2018; Foon Rhee. “Why Mayor Steinberg now owns Convention Center decision, for good or bad.” The Sac Bee. Opinion. January 30, 2017. Web January 2018.
31 Supra note 31.
32 Ryan Lillis. “Hey Amazon, Sacramento is ready to offer you financial incentives.” The Sac Bee. City Beat. October 24, 2017. Web January 2018.
33 Hudson Sangree. “Will Sacramento avoid another housing boom and bust?” The Sac Bee. Real Estate News. July 17, 2017. Web January 2018.
34 Katy Murphy. “Rent-control policy `likely fueled the gentrification of San Francisco,’ study finds.” The Mercury News. Business, Real Estate. November 2, 2017. Web January 2018.
35 Michelle Robertson. “Rent-control policies likely 'fueled' SF gentrification, Stanford economists say.” SFGate. November 3, 2017. Web January 2018.
36 Adam Brinklow. “Stanford paper says rent control is driving up cost of housing in San Francisco.” Curbed San Francisco. San Francisco Rent Control. November 3, 2017. Web January 2018.
37 Sarah Karlinsky and Kristy Wang. “Non-Primary Residences and San Francisco’s Housing Market.” SPUR. SPUR White Paper. October 21, 2014. Web January 2018.
38 Supra note 38.
39 Joshua Sabatini. “SF to explore taxing property owners who keep buildings, units vacant.” San Francisco Examiner. July 11, 2017. Web January 2018.
40 Supra Note 38.



California Housing Crisis: Part 1


Editor’s Note: This is Part 1 of a three-part article. Part 2 will appear in the June Apartment Journal.

Early in 2018, California lawmakers tried but failed to repeal the State’s Costa Hawkins Rental Housing Act—the law that restricts the ability of local governments to establish extreme forms of rent control. Had the repeal effort been successful, local governments would have had the authority to restrict rents on single-family homes, condominiums, and all newly constructed housing units. Repeal would also have brought back vacancy control—the prohibition on rent increases when a housing unit becomes vacant.

While repeal would have provided protections for tenants against rent increases in the short term, the long-term effects would have devastated the State’s housing supply as extreme forms of rent control make owning and developing units unprofitable and unmanageable. Moreover, rent control often leads to severe gentrification in which higher income earners eventually push low-income individuals and families out of their rent controlled units.

The long-term negative impact of extreme forms of rent control on tenants and on property owners and managers was precisely the reason the Costa Hawkins Act was originally signed into law in 1995.

It was a bipartisan effort to allow for moderate rent control provisions while curbing out-of-control regulation on the rental housing industry. The resulting bill did just that: it reigned in some of the most extreme forms of rent control by outlawing vacancy control and price ceilings on single-family homes and new construction, while preserving local government’s ability to place rent control restrictions on properties built before 1995.

The decision to repeal the Costa Hawkins Act comes at a time when the State is in dire need of affordable rental housing. According to the State’s nonpartisan Legislative Analyst’s Office (LAO), California’s ongoing housing shortage and affordability problems are getting worse. The problems stem from years of population growth and a long history of costly government regulatory roadblocks to housing development, local government favoritism toward commercial development and job growth over housing development (“fiscalization of land use development”), high permit and impact fees, and rising land and housing development costs. As is clear from the LAO report, many of the State’s housing problems are directly attributable to government action and inaction.

The irony here is that government leaders are attempting to address government created housing shortage problems by adopting legislation that will serve to further restrict the State’s housing supply.

The government’s repeal effort, as counter productive as it may be, however, is consistent with a long history of government decisions that have contributed to, rather than solve, the ongoing housing crisis. This paper focuses on those very government decisions which have contributed to the housing shortage and have kept California in a perpetual state of housing crisis for the last 50 years.

I. The Wisdom of the Legislative Analyst’s Office’s 2015 Housing Report.

California is building too few homes in coastal areas, the now infamous 2015 LAO housing report says.1 Land costs are too high, but can be offset by more density, the report continues.2 Building costs, development costs, and permitting fees are also through the roof according to the report (and not in those words).3 To the question of why coastal areas are not building enough, the housing report provides four answers: a) NIMBY (“not in my back-yard”), b) stringent environmental reviews, c) local finance structures which incentivize nonresidential development over homes (also called fiscalization of land use), and d) limited vacant land.4

Notably, while the LAO report notes that rent control eases housing costs for some,5 it also does not recommend rent control or other housing regulations as viable options to address the State’s crisis. It does state, however, incentivizing development of private housing is the number one priority to begin easing housing shortage and affordability problems.6

II. Government and Its NIMBY Policies.

“Not-In-My-Back-Yard,” the policy or principle of being anti-development in one’s own neighborhood or city, has long been recognized as one of the catalysts for California’s housing shortage. As summarized by the LAO:

For decades, California’s local communities—particularly coastal communities-have built too little housing to accommodate all those who wish to live here.

California’s cities and counties make most decisions about when, where, and to what extent housing will be built. Many local communities have used this authority in ways that have constrained housing development. These community decisions understandably reflect residents’ concerns about the changes that new housing may bring. New housing—and the associated new residents—can exacerbate traffic congestion and parking shortages, stretch local facilities, slow home price appreciation, and alter the community’s character.7

Interestingly, but not surprisingly, NIMBY-ism has racist roots. In San Francisco, for example, as affordable housing needs increased, it began building segregated housing projects by race.

San Francisco did not want its Chinese American residents to live anywhere except in Chinatown. To ensure their confinement in their picturesque ghetto, the Housing Authority imposed a whites only rule for the first three projects it built, all of which still stand: Holly Courts, Potrero Terrace and Sunnydale.

* * *

The official policy [of the San Francisco Housing Authority] was to accept only tenants who conformed to a “neighborhood pattern”—the racial and ethnic demographics of a given neighborhood. Since the city was largely white, minorities were allowed to live in public housing only in a few rundown areas.8

Housing was not welcome in San Francisco. Many neighbors and city leaders opposed the development of public housing projects, fearing the projects would be populated by an undesirable class of people, depress property values, give a false portrayal of the city or an area as a slum, and endanger children.9

As San Francisco’s population continued to rise, NIMBY-ism morphed, at least on the surface, from discriminatory sentiment to one justified by preserving the city’s physical character and environmentalism. Privately, many were concerned with preserving property values.

Over the years, these anti-development sentiments were translated into restrictive zoning, the most cumbersome planning and building approval process in the country, and all kinds of laws and rules that make it uniquely difficult, time-consuming, and expensive to add housing in San Francisco.

This anti-development sentiment has kept San Francisco from meeting its housing needs. When San Francisco should have been building 5,000 new units a year to keep up with demand, it has only averaged 1,500 units a year for the past two decades.10 All across the city, instead of building up and more densely it has created roadblocks and restrictions. One of the biggest roadblocks is the city’s height limits, which limits buildings to no more than 40 feet.11 On average, San Francisco is three stories high.12 Compare that to Paris, which aver ages seven stories, and many Asian cities, which are much taller.13 By density, San Francisco does not even figure on the 50 densest cities in the world.14

NIMBY-ism perpetrated by local governments is one of the root causes of the State’s housing shortage. Governments’ prioritization of city character over meeting housing has led to the adoption of many anti-development laws which in turn has slowed development. Only recently has the State Legislature acknowledged the problem. To combat government sponsored NIMBY-ism, it passed several bills in 2017 to address the issue. One of the bills forces cities to approve projects that comply with existing zoning if not enough housing has been built to keep pace with housing tar gets, while another bill penalizes governments for rejecting housing projects that comply with zoning requirements.

Editor’s Note: This is the end of Part 1 of 3. Part 2 will appear in the June issue of the Apartment Journal.

Ron Kingston can be contacted at This e-mail address is being protected from spambots. You need JavaScript enabled to view it No portion of this article may be reproduced or copied without the permission of the author (Copyright © 2018 CALPCG).

1 Mac Taylor. California’s High Housing Costs: Causes and Consequences. CA Legislative Analyst’s Office. An LAO Report.
March 2015. Web Jan. 2018.
2 Id. at 12-13.
3 Id. at 13-14.
4 Id. at 15.
5 Id. at 7-9.
6 Id. at 34-35.
7 Mac Taylor. The 2016-17 Budget: Considering Changes to Streamline Local Housing Approvals. Ca. Legislative Analyst’s Office. May 2016. See Summary at 1. Web January 2018.
8 Gary Kamiya. “How SF’s Housing Authority kept its early projects all white.” San Francisco Chronicle. July 22, 2016. Web January 2018.
9 Id.
10 Gabriel Metcalf, Sarah Karlinsky and Jennifer Warburg. “How to Make San Francisco Affordable Again.” SPUR. The Urbanist. Issue 530. February 2014. Web January 2018.
11 Madeline Stone. “This Is What San Francisco Could Look Like If It Had Enough Housing For Its Growing Population.” Business Insider. May 22, 2014. Web January 2018.
12 Christian Nicholson. “Nostalgia and NIMBYism: Rebecca Solnit’s San Francisco — The Bold Italic — San Francisco.”
The Bold Italic. February 18, 2014. Web January 2018.
13 Id.
14 Id.


Fighting Back


The residential rental housing industry is under assault. Politically. Economically. Morally. Socially. The wide-spread negative narrative juxtaposed with California's "housing crisis" has put residential rental property owners in the cross-hairs of complaint akin to the Robber Barons of the Old West. From city council chambers to the legislative halls of the Capitol the chorus of claimed avarice and greed follow in the wake of anecdotal examples of a few outlier's excessive rent increases. The aberrant actions of a few have unnecessarily tainted the entire rental housing community. It brings to mind a favorite Pogoism: "We have met the enemy and they are us."

A number of very significant legislative proposals have surfaced in the wake of this industry criticism. We will report on these from time to time as the session heats up with committee hearings and floor votes. And we will look to you for grass roots support through active response to appropriate Red Alerts. While important in and of themselves, they pale in comparison with the most significant challenge facing the industry in the last 20 years: a proposed ballot initiative coined the "Affordable Housing Act" that would gut the Costa-Hawkins Rental Housing Act, thereby paving the way for local enactment of strict forms of rent and price control on all rental properties.

The proponents organized under the banner "Coali­tion for Affordable Housing" have amassed over $1 million and collected the 25 percent signature threshold as of the end of February. It is expected that they will spend whatever it takes to get the ballot initiative qualified for the November 2018 statewide ballot. They have until June 25 to collect the 365,880 signatures needed to qualify for the November General Election.

It is past time for individual rental property owners to be complacent about the events and circum­stances surrounding this industry. Our Association is certainly not taking the important issues of the day lying down. We have and will continue to develop and implement a comprehensive action plan to actively oppose this proposed initiative. Every day we will be initiating or participating in worthwhile activities to inform our members and the public the actual and practical impact of the ballot initiative:

  • On single-family homeowners that could face rent and price control mandates including the neces­sity to argue before rent boards for fair return.
  • On renters who unquestionably will find it extremely difficult to find replacement housing.
  • On property owners and renters when 58 coun­ties and over 482 cities can define and implement a confusing array of rent control ordinances, charter provisions or regulations.
  • On businesses, including the financial markets, and government.

Notice to owners: Get involved. Support your Asso­ciation's political activities and educate yourself about the major issues of the day. Join MCSC's grass roots campaign against the proposed initiative. Talk to your friends and neighbors and local political representatives. Most importantly, talk to your residents. Let them know you are a faithful steward of your property and their well being. Look at their circumstances from their viewpoint. Many, if not most, tenants are there by choice, not circumstance. Also, but not last, contribute financially to MCSC's efforts to derail or defeat the proposed initiative.
Yes, the issue is one of the biggest we have faced in some time. Are you ready to step in with both feet and help us?

All Hands on Deck


The legislative attention to housing issues over the past year has given rise to an incredible surge in political advocacy of all stripes. If “the meek will inherit the earth,” as some say, one might speculate as to the planet’s condition in the aftermath of scorched-earth-style extremism in this Battle Royale. If there is one constant theme that emerges from all the rhetoric surrounding California’s newly recognized “housing crisis,” there is plenty of blame to be spread around lots of different players.

Tenant advocacy groups have mobilized an imposing force with a single message of hope for relief from spiraling costs of rent, and many point to the rental property owner as being the culprit who caused the condition. Their immediate solution: rent control, repeal the 1995 Costa-Hawkins Act that placed restrictions upon local government’s ability to enact the strictest forms of price controls on rental properties. That proposed solution was embodied in Assembly Bill 1506 (Bloom), which failed passage this past January in the Assembly Committee on Housing and Community Development. And the same effort is embodied in an initiative proposal cleared for circulation by the

Attorney General with the following description:


Repeals state law that currently restricts the scope of rent-control policies that cities and other local jurisdictions may impose. Allows policies that would limit the rental rates that residential-property owners may charge for new tenants, new construction, and single family homes. In accordance with California law, provides that rent-control policies may not violate landlords’ right to a fair financial return on their rental property. Summary of estimate by Legislative Analyst and Director of Finance of fiscal impact on state and local government: Unknown, but potentially significant, changes in state and local government tax revenues. Net decrease more likely than net increase. Potential increase in local government costs of up to tens of millions of dollars per year in the long term, likely paid by fees on owners of rental housing. [Bold in original.]

The prospect of continuing legislative battles in the shadow of a looming ballot fight gives rise to determined groups of rental property owners to mobilize a resistance to the challenges ahead. This is an All Hands on Deck moment for owners everywhere to understand exactly what is at stake in the coming months as the dialogue heats up.

Years and years of inadequate housing supply has matched deficiencies in roads and highway maintenance, water and sewer needs, and a host of other infrastructure needs that have simply failed to match a burgeoning 21st Century society.

Moving away from the Number One priority on every rental owner’s list of issues that merit attention, we turn to tackle another leftover challenge that has gained traction this year. Senate Bill 721 (Hill) passed the Senate in late January, meeting the constitutional deadline for passage of bills in its house of origin. The bill would require property owners of three (3) units or more to hire a qualified inspector every six years to inspect 15 percent of all exterior wood supported or stabilized walking surfaces above six feet from the ground, including decks, balconies, porches, stairways, walkways, entry structures, and their supports and railings. There are a number of shortcomings in this proposal and they are cause for real concern. We outline here only a few of the many reasons why the measure requires additional attention to its detail.

Owners are already subject to rigorous inspection and maintenance standards. Existing statute, regulation, and case law provide a whole spectrum of inspection and maintenance requirements that developers and owners must abide by to properly construct and operate ownership and rental property. Additional inspections are redundant and unnecessarily costly. Instead of requiring regular state-mandated inspections, the Legislature should focus on strengthening inspections that are already in existence, and amending the building code to ensure better materials are used.

Balcony and deck tragedies are preventable without regular state-mandated inspections. One of the central culprits in the recent Berkeley and Folsom balcony and stairway collapses was dry rot. Experts agree that certain changes to the building code and to inspection standards during the construction and permitting process are necessary. Proposals include using better, stronger and more durable material, and better weatherproofing technologies and techniques. The State has since implemented new emergency building code regulations to address some of these issues. We support these approaches, because they provide concrete prevention tactics that can easily be incorporated into the building design and permitting process. SB 721, on the other hand, requiring regular and costly inspections is extreme, redundant and unwarranted.

Many local inspection programs already exist. Many cities and counties have already adopted residential rental inspection programs requiring regular inspections of rental property. To the extent these inspections include or are amended to include inspecting decks and balconies, they should be exempt.

Inconclusive inspection reports will be problematic and are not addressed in the bill. SB 721 requires owners to fix any decks or balconies that are in need of repair or replacement, hazardous, structurally deficient or noncompliant as determined by the inspector. In many cases, however, the need for repair will be inconclusive because the structure is hidden behind a wall. Inspectors will likely report their determinations as inconclusive followed by a statement indicating that further testing, including destructive testing, is required to make a determination. Destructive testing is incredibly expensive and intrusive because it literally requires destroying and tearing down walls. The bill does not address inconclusive inspections and reports. If owners will be required to conduct destructive testing every time a report is inconclusive, the time and expense will be extraordinary. We oppose such intrusive testing based on inconclusiveness.

Mandatory retention of records is unnecessary. SB 721 requires owners to keep records of all inspection reports indefinitely. Indefinite retention of records appears by all counts to be unprecedented. Property owners are required to make disclosures of material defects and repairs made within a reasonable amount of time, but records of such repairs do not need to be kept by the owner. Any significant repair that requires pulling a permit will be documented at the local recorder’s office. Similarly here, any major repair to a deck or balcony will likely require pulling a permit, and as such will be recorded. A mandate to keep all inspection reports for all eternity creates unnecessary liability, and is itself unnecessary to achieve the goal of the bill.

No appeal process. The bill is silent on how owners can object to, oppose, or appeal a decision of an inspector or local government about the need for a repair, and with regard to fines, penalties, and liens. Due process commands that owners have a fair process to contest determinations made by state and local governments.

Incentives. The bill creates new inspection mandates without providing any incentives or cost offsets to help owners manage the high cost of inspections and repairs. We urge the author to consider ways the state and local governments can help owners achieve structurally safe decks and balconies by offering incentives, rebates, tax writeoffs, and other cost offsets. One approach would be to ensure owners are protected from liability after going through the inspection process and making repairs to comply with the law. A process for indemnification, immunity or a liability shield would help incentivize owners to be proactive to make sure their decks and balconies are up to date and well maintained.

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