If you ask any Californian to describe the Ellis Act and the Costa-Hawkins Act, you’re at least as likely to get a blank stare as an informed exegesis on two state laws that have had—and are continuing to have—a destructive effect on the supply of affordable housing in the state’s urban areas. That’s too bad, because public awareness of a need to reform these laws is badly needed to put pressure on state legislators who waver in the face of intense lobbying by apartment house owners and other real estate interests.
In a nutshell, the Ellis Act forbids local governments from interfering with a landlord’s right to leave the rental business, while the Costa-Hawkins Act bars cities and other public entities from imposing rent control on properties built after 1995. The Costa-Hawkins Act also prohibits any limits on the amount of rent a landlord can charge for newly-vacated apartments under existing rent control laws.
Adopted in 1985, the Ellis Act was a direct reaction to a court ruling upholding a Santa Monica rent control provision that required a landlord to show that demolishing his six-unit apartment house would not adversely affect the city’s affordable housing supply. That city’s rent control ordinance, which limited the amount landlords could charge for newly-vacated units, took another major hit in 1995 when the Costa-Hawkins Act wiped out that “vacancy control” provision.
The aftermath has been dire. Santa Monica, a city of 94,000, has lost more than 2,500 rent-controlled units. One of the most expensive cities in California, it has experienced a boom in apartment and condominium construction, but almost all have been aimed for an upscale and luxury market. The plight of lower income renters in the city of Los Angeles has been even worse. In the past two decades, almost 30,000 rent-controlled apartments have been taken off the market, the properties typically converted to condominiums or re-developed into luxury rentals. Thousands upon thousands more rent-controlled apartments have been—to use the current jargon—”Ellised” out of existence in San Francisco, San Jose, Oakland, and other California jurisdictions with rent control.
All these places have seen the construction of new apartments, but without any threat of rent control, privately owned developments have almost all been designed to appeal to the top of the market. In the meantime, working class people and professionals like teachers and other public employees face a daunting struggle to find housing they can afford and often pay more than half or more of their incomes in rent.
The legislature’s reaction to this affordable housing crisis has been to seek ways to increase housing construction, compelling local governments to lift zoning restrictions and allow the construction of accessory dwelling units and taller, denser developments near mass transit lines. And most significantly, it has essentially put an end to single-family zoning, which, advocates argue, has not only driven up property values and rents, but has been a major instrument in the promulgation racial inequality.
People have argued, often vociferously, over the question of whether these new initiatives will actually increase the supply of affordable housing for those who most need it, or whether they are an unwarranted gift to developers and the construction industry. What can’t be argued, however, is that debating ways to increase affordable housing while resisting any significant reform to laws that enable the destruction of affordable housing is an appalling irony.
Efforts to repeal the Ellis Act and the Costa-Hawkins Act have gone nowhere. A few modest reforms to the Ellis Act have been approved over the years, but the latest, an amendment designed to slow down use of the Ellis Act by real estate speculators, has fallen short, albeit by only a handful of votes. That amendment, which bars an owner from invoking the Ellis Act to evict tenants of rent-controlled units within five years of buying a property, was supported by a wide range of tenant and housing advocacy groups, but opposed by organizations with lobbying clout like the California Apartment Association and the California Rental Housing Association.
Another irony of the Ellis Act is that it was touted during the original debate as a way to keep cities like Santa Monica from forcing “Mom and Pop” owners to stay in the rental business when they wanted to retire or otherwise free themselves from the rigors of being landlords. In practice, the law has been regularly invoked by deep-pocketed corporate developers, including a Colorado-based real estate investment trust that at the time was the largest owner and manager of apartments in the United States.
Could the Ellis Act be amended to actually protect “Mom and Pop” landlords while putting the brakes on corporate entities looking to boost their profit margins by converting apartments to condominiums or redeveloping properties into luxury rentals? Could the Costa-Hawkins Act be amended to allow some form of vacancy control for affordable units? And even some form of rent control on newly-constructed units, perhaps along with incentives for the landlords?
I can’t answer these questions with the kind of fact-based analysis needed to support specific measures. But I do know that legislators should be taking a long, hard look at questions like these, and stop telling themselves that they can seriously ease the state’s affordable housing crisis while these laws, as they now stand, are on the books.