Note: This recommendation is written in my personal capacity, as Shane Phillips, and does not reflect the views of my employer or colleagues.
Proposition 33 does two things: It repeals the Costa-Hawkins Rental Housing Act in its entirety, and it adds the following text to state law: "The state may not limit the right of any city, county, or city and county to maintain, enact, or expand residential rent control."
It’s a simple initiative, in a sense, but that doesn’t mean voters will have an easy time interpreting what would happen if it passes, or its likely impacts on California tenants. I’m going to do my best to explain what it would do — and what it would and wouldn’t allow — and why I recommend voting no on Prop 33.
Before I do, let me be clear: I’m not anti-rent control. I voted no on Proposition 10 in 2018, but I voted yes on Proposition 21 in 2020. I’ve argued for strengthening Los Angeles’ rent stabilization ordinance. In my book, The Affordable City, I make the case for prioritizing supply, subsidy, and stability — including rent stabilization and good cause eviction protections. Based on conversations with people who have read my book, I’d wager that I’ve convinced hundreds of rent control skeptics to support the policy under the right conditions.
I’m not anti-rent control, but I know enough to be wary of carelessly-designed rent control policies, and Proposition 33 eliminates all protections against carelessly-designed rent control policies.
What does Costa-Hawkins do?
The Costa-Hawkins Rental Housing Act, passed in 1995, restricts cities from adopting certain forms of rent control.
The two most important elements of the law are prohibiting vacancy control and limiting rent control to multifamily housing built in 1995 or earlier. More on vacancy control in the next section.
Cities that had rent control at the time Costa-Hawkins passed are stuck with whatever cut-off date was in effect locally at that time. In Los Angeles, for example, rent control generally only applies to multifamily housing first built on or before October 1, 1978. Inglewood, in contrast, adopted rent control in 2019 and was therefore able to set its eligibility date at February, 1995. This provision of the law results in arbitrary and unequal application of rent control in California, and I’ve argued for its reform.
But what is rent control?
Rent control refers to a spectrum of policies that restrict the rents landlords may charge their tenants. Most often, this takes the form of limiting how much landlords can increase their tenants’ rent each year. Rarely, it entails explicit price ceilings; e.g., “you cannot charge more than $800 per month for this unit.” (This is really more of a World War II thing, and I don’t believe it’s practiced anywhere in the U.S. today.)
There are at least four important elements of rent control policies:
Type of housing subject to rent control. Are all housing types potentially eligible? Only multifamily? What about individually-owned condo units, or smaller buildings (e.g. four units or fewer), or units owned by “mom and pop” landlords?
Age of housing subject to rent control. Are homes rent-controlled from the day they open, or 15 or 20 years after completion? Or is it a hard cut-off (e.g., any housing built before 1990)?
Limit on annual rent increases. Are rent increases limited to the annual change in the consumer price index (i.e., the inflation rate), or a percentage of CPI or CPI plus a fixed percentage? Are there floors or ceilings on rent increases independent of inflation (e.g., CPI or 3%, whichever is more, or CPI or 10%, whichever is less)?
Vacancy control vs. decontrol. Are rent increases restricted within and between tenancies (vacancy control), or are landlords allowed to charge the “market rate” for their units when one household moves out and another moves in, and rent increases are only restricted during tenancies (vacancy decontrol).
1st- and 2nd-generation rent control
Broadly, there are two categories of rent control: first-generation or “hard” rent control, and second-generation or “soft” rent control, also sometimes called rent stabilization. First-generation rent control is most strongly associated with vacancy control, though other characteristics can arguably place a policy in this category, such as applying rent control to newly-constructed housing units or implementing hard rent caps.
First-generation rent control, which froze rents, was national policy during World War II — an emergency response to massive labor shifts and localized housing shortages as the country engaged in total war. By the early 1950s, as production ramped up and housing supply caught up to demand, the policy had been abandoned everywhere except New York City, and even there it was restricted to pre-1947 housing. Over the next few decades it cropped up here and there across the country, including in several California jurisdictions (before Costa-Hawkins), but it has remained very rare.
Second-generation rent control, in contrast to first-gen, is most strongly associated with vacancy decontrol. This policy, again, removes the restriction on rent increases between tenancies, allowing landlords to reset their rents to the prevailing market rate when a new household moves in.
By disallowing vacancy control and restricting rent control to multifamily housing built in 1995 or earlier, the primary purpose of the Costa-Hawkins Rental Housing Act was to prohibit first-generation rent control in California, while still allowing cities to operate second-generation rent control if they choose.
What do we know about the effects of rent control?
To be blunt, first-generation rent control has been disastrous where it’s been implemented. It made perfect sense as a temporary war-time policy, but it’s a terrible strategy for long-term affordability. Broadly speaking, housing affordability is correlated with housing abundance, and first-generation rent control drives cities in the opposite direction, toward chronic housing shortages.
If I could point readers to just one journal article on the subject, it would be this 2024 literature review by Konstantin Kholodilin, in the Journal of Housing Economics: “Rent control effects through the lens of empirical research: An almost complete review of the literature.” In particular, I would direct you to the figure below, which summarizes the findings of scores of empirical studies along multiple dimensions. I’ll note that this figure aggregates studies of both first- and second-generation rent control, but the direction of the effects is generally similar across both types, with stronger effects for first-gen, or hard, rent control.
To put this figure in words, rent control: decreases rents in the controlled housing stock and increases rents in the uncontrolled stock; reduces household mobility; reduces rental housing supply and often increases homeownership (mainly by spurring conversion of rentals to owner-occupancy); reduces housing construction; reduces housing quality; and increases misallocation of housing. For anyone interested, last year on UCLA Housing Voice we also had a conversation with Sahil Gandhi and Richard Green about their research on rent control in India, where very strict regulations combined with an exceptionally onerous eviction process have led to major problems with housing vacancy.
Given the results of Kholodilin’s review and the figure above, you might be wondering why I support rent control at all. I have many reasons, but I’ll focus on two here. One is that strident opponents of rent control tend to overlook its benefits, especially those benefits that are difficult to assign a dollar value. The other, critically, is that second-generation rent control, or rent stabilization, mitigates a large portion (not all) of the negative effects of first-generation rent control.
From my perspective, the most under-acknowledged benefit of rent stabilization is predictability. Renters in America live incredibly precarious lives, with most being subject to unrestricted rent hikes — 10%, 20%, 50% in a single year — and to eviction at any time, and with little notice. Neither rent control nor rent stabilization solve this problem entirely, but they dramatically improve tenure security compared to the status quo. Cost savings aside, there’s immense psychological value in knowing that you can stay in your home if you choose to and having some certainty about how much your rent payments will grow year-to-year.
And as I said, thoughtfully designed second-generation rent control mitigates many of the worst outcomes of hard rent control. Vacancy decontrol strongly reduces the incentives for landlords to take their units off the market through condo conversion and by other means. (Ever wondered why New York City has so many co-op buildings, while the rest of the country has almost none? Yeah, that’s hard rent control.) Exempting new developments from rent control for their first 15–25 years maintains the incentive for developers to continue building new housing, which is essential for long-term affordability — a topic we discuss on UCLA Housing Voice here, here, here, here, and here.
Cities like Tokyo, which has rent stabilization and builds four or five times more housing per capita than Los Angeles and New York, also show that tenure security and housing abundance are not mutually exclusive. They are in tension — I want to be clear about that — but achieving one doesn’t require abandoning the other.
Isn’t vacancy control better than vacancy decontrol?
Probably the greatest weakness of second-generation rent control, and vacancy decontrol in particular, is that it creates bad incentives. As a landlord operating under vacancy decontrol, you have a strong incentive to evict or otherwise drive out long-term tenants. These tenants typically pay rents significantly below market rate, and when they leave — voluntarily or otherwise — the landlord is able to increase their unit’s rent back to market rate. Under vacancy control, this incentive is heavily diminished. The maximum rent increase is the same regardless of who lives in the unit next year, and it’s easier to keep it occupied by the same household than to find a new one.
So if tenure security is important, isn’t vacancy control better than decontrol? Sadly, no.
One reason vacancy control has such a poor record is that when rents are restricted permanently, the cost of operating a building tends to grow in relation to the revenues it brings in. Over time this leads to lower housing quality and reduced rental housing supply. Rather than continue renting their units at a declining profit or a loss, landlords convert their buildings to condos or co-ops, or they redevelop the property to a non-rental use, or owner-occupiers move in.
Another reason vacancy control doesn’t work is that rent control is not — and cannot be — targeted at higher-need populations. Consider a home covered by vacancy control that rents for $800/month in a neighborhood where the market-rate for an uncontrolled unit is $2,000/month. When the controlled unit goes on the market, it will be in extraordinarily high demand. There will be hundreds of applicants, if not thousands, ranging from single mothers earning minimum wage to mid-career college-educated couples earning well above the city’s median income.
Who do you imagine the landlord is more likely to rent to? The mother with the limited credit history, volatile employment, and children who may increase the odds of property damage or noise complaints from other tenants, or the privileged couple? How might these (entirely understandable) preferences exacerbate disparities by race and ethnicity? Will three- and four-bedroom units go to five- and six-person families, or to singles and couples?
Many applicants can afford to pay much more than $800/month, and so some offer to renovate the unit at their own expense if they’re selected. Some might offer “key money” — an under-the-table move-in payment of $5,000 or $20,000 or more — or the landlord might solicit it (illegally). Vacancy-controlled housing is rife with black and grey markets, and the poorest and most vulnerable are never the primary beneficiaries of these kinds of markets.
Put another way, vacancy control solves the incentive problems associated with vacancy decontrol by replacing it with different and much worse incentive problems.
What happens if Proposition 33 passes? What would change?
First, it’s important to understand that Prop 33 does not implement rent control anywhere. It only allows cities to adopt stronger and more expansive/restrictive forms of rent control than what is allowed today.
If your city doesn’t have rent control today, then it’s unlikely to adopt it after Prop 33 passes. Cities without rent control can adopt it at any time. If your city hasn’t adopted the second-generation version allowed under Costa-Hawkins, then there’s no reason to believe they will adopt the far more controversial first-generation version if given the opportunity.
The exception is cities that intend to use first-generation rent control in bad faith — not as a well-meaning but misguided affordability strategy, but as a means of preventing the development of new housing. Republican councilmember Tony Strickland, of the notoriously anti-housing city of Huntington Beach, has made this argument explicitly. Cities like Huntington Beach could, in theory, mandate that all new rental housing — and only new rental housing — must rent for $1 per month. This would put at absolute halt to rental housing development of all kinds, market-rate, deed-restricted affordable, and mixed-income. There are likely numerous devious strategies cities could employ to this end.
If this hypothetical sounds implausible, remember the second major element of Proposition 33. In addition to repealing the Costa-Hawkins Rental Housing Act, it states: "The state may not limit the right of any city, county, or city and county to maintain, enact, or expand residential rent control." That sounds pretty unambiguous.
I’m not a lawyer so I can’t speak to the legal ramifications of this initiative. I suspect even the lawyers couldn’t tell you what would happen when bad faith (or even good faith) expanded rent control policies run headlong into laws requiring cities to plan for an adequate supply of housing, to affirmatively further fair housing by building in higher-opportunity neighborhoods, or to meet commitments made in state-certified housing elements and not violate the provisions of the Housing Accountability Act. What I do know is that I don’t want to risk any of these critical state policies being undermined by Prop 33, especially in light of its meager other benefits and predictable harms.
Note, also, that Prop 33 may have a chilling effect on housing production — further driving up rents and housing prices — even in jurisdictions without rent control and without plans to adopt it. It leaves the door open for city councils and voter initiatives to adopt strict rent control at any time, such that projects permitted or built today could be rendered financially infeasible tomorrow, or at any time in the future. California is already among the most challenging, uncertain, and expensive states to build housing, and Prop 33 would make matters worse.
If you live in a jurisdiction that already has rent stabilization and are hoping the passage of Prop 33 will result in your city adopting hard rent control, it may happen. Only weeks ago, San Francisco Board Supervisor and mayoral candidate Aaron Peskin put forth an ordinance expanding rent control to all housing in the city, should the initiative pass in November. This was scaled back and the cutoff date moved to 1994, then passed unanimously on October 8th. Notably, the ordinance does not include vacancy control, though it’s sure to become a major campaign issue in a few cities, including San Francisco. Los Angeles hasn’t even adopted the comparatively minor reforms already within its power, and so approving vacancy control seems unlikely.
Wherever vacancy control is adopted, some tenants will benefit relative to the rent stabilization, Costa-Hawkins status quo — that is true, without question. Some of the tenants who benefit will be poor or marginalized, and in need of all the assistance they can get — that is also true.
But many more tenants, now and in the future, including the poor and marginalized, will be harmed. There will be fewer rentals available, and those with the greatest need will have the lowest odds of moving into them. The units that are available will be low quality, and their quality will degrade over time. People with more resources will overconsume housing and those with fewer will crowd into what’s left. Prices in the unregulated market, including for-sale homes and condos, will rise even further out of reach.
And that’s really the rub: Proposition 33 opens the door to abuse and misuse of local rent control policies and permanently ties the hands of our elected representatives, and it does all this so that a small number of cities may expand their rent control policies in ways that will unequivocally worsen the state’s housing affordability crisis. It has very little upside, and its downsides are potentially limitless. It’s a bad initiative and a very bad idea.
If Prop 33 ain’t it, what should we do instead?
Part of the reason rent control keeps showing up on the ballot is that the state legislature has not done enough since the passage of Costa-Hawkins. (Another part is the use of federal subsidies by the AIDS Healthcare Foundation to fund these and other initiatives, including development moratoriums and condom laws — vote yes on Prop 34.) Legislators passed an statewide anti-rent gouging law in 2019, AB 1482, but it’s not enough. Costa-Hawkins itself needs to be reformed.
The most important thing the state legislature needs to do is dispense with the hard eligibility cut-off date and allow rentals to age into rent stabilization over time, after perhaps 20 or 25 years. This is sometimes referred to as “rolling” rent stabilization, and I wrote about it more than eight years ago. Housing built today should become rent-stabilized housing in the future, and today California law prevents that from happening.
If Prop 33 fails — the third failure in six years — then legislators may take it as a signal that voters are happy with the state’s existing rent control laws. I think that’s the wrong lesson, and lawmakers should engage with the concerns represented by the roughly 45% of voters who voted for the prior initiatives, and are likely to make their voices heard this November as well.
For anyone interested, a few weeks ago I discussed Proposition 33 at a UCLA event hosted by our Government and Community Relations department and moderated by Jim Newton. You can watch the video here.
I wrote this explainer/guide on Prop 33 because quite a few people have asked for my advice on how they should vote on it. There are a few other housing-related initiatives on California state and local ballots that fewer people have asked me about — probably because they already know how I’m voting — but I wanted to make the recommendations anyway, especially because I am strongly in favor. So without further ado:
Proposition 5: Making it easier for local governments to fund affordable housing and infrastructure
Vote yes.
Currently, local governments need approval from two-thirds of voters to increase taxes for specific purposes, including affordable housing and infrastructure needs. In 1996, Proposition 218 was passed by 56.55% of voters, and those voters have tied our hands for almost thirty years by requiring a higher share of voters than voted for Prop 218 to pass local taxes — even in local jurisdictions where the majority of voters opposed the initiative. This is an anti-democratic policy. One-third of voters shouldn’t have veto power over the other two-thirds.
Proposition 5 will reduce the threshold to 55%. This still unreasonably empowers some voters over others, and the initiative includes some additional restrictions that limit its application, but it is an important step in the right direction. Vote yes on Prop 5.
Measure A: Raising the sales tax to fund affordable housing, homelessness prevention and reduction in Los Angeles County
Vote yes.
This initiative repeals the Measure H quarter-cent sales tax increase approved by voters in 2017, expiring in 2027, expanding the sales tax to a half-cent and making it permanent. The measure is expected to raise about $1 billion per year in Los Angeles County to fund affordable housing development and rent assistance, homeless services and prevention, mental health care, transitional and emergency housing, and a wide range of similar services and programs. The funds would be distributed to the County (up to 43%), local governments (at least 15%), and the Los Angeles County Affordable Housing Solutions Agency, LACAHSA (36%). Ballot language here. The United Way of Greater LA has led the effort to write Measure A and get it approved, and they’re an organization whose work I respect immensely.
Since approving Proposition HHH in 2016 (at the city level) and Measure H in 2017 (county), the number of people experiencing homelessness in LA County has increased rather than decreased. This is not because the money has been wasted. Indeed, homelessness would be much worse if not for these revenues and the efforts they’ve funded. In 2017, the County assisted 14,252 people into permanent housing placements. By 2023 that number had grown to 27,300 (slide 14). The problem is that despite this rapid growth in the number of people being helped off the street each year, the number becoming homeless is growing at an even faster rate.
More people are being pushed into homelessness because elected officials and voters have stood in the way of zoning reform and housing abundance, causing prices to rise further out of reach for many LA residents. If leadership tells you this problem can be solved by more spending alone, they are wrong — subsidies are not a substitute for supply. But neither is supply fully a substitute for subsidies, and people who tell you to vote no on Measure A, either to punish ineffective civic leaders or because they believe it won’t help, are also wrong. We need supply and subsidy (and stability), but voting against one won’t deliver the other. Voting no will hurt the people experiencing and at risk of homelessness, first and foremost, and it will make the problem worse. Vote yes on Measure A.