SPECIAL SECTION: POLICYAND LEGISLATION
MID-TERM WATCH
FACTOR #1: Rent Control Repeals & Regulations
Markets in the Spotlight:
CALIFORNIA: PROPOSITION 10 Proposition 10 would repeal the Costa Hawkins Act, freeing “frozen” rent control policies up for removal or adjustment.
ILLINOIS: REPEAL RENT CONTROL PREEMPTION
Illinois currently has a statewide ban on rent control. If the repeal passes, it would remove that ban.
What is Rent Control? Rent control limits the amount a landlord may charge for renting out a home, apartment, or other types of real estate. It creates a price ceiling either by capping the amount that may be charged or creating limits on the rate at which rent can be increased for existing tenants. Rent control is usually linked in some way to inflation, and supporters of the concept believe it helps create a larger stock of affordable housing options for tenants. Critics argue that rent control distorts the market, encourages landlords to evict tenants instead of work to retain them in some cases, prevents property owners from creating sustainable long-term income using rental strategies, and often stunts the growth of new-housing inventory.
of the desired effect. Many analysts, including those at California’s Legislative Analyst’s Office, believe expanding rent control discourages new construction because it makes new rental housing a less profitable venture. What if Proposition 10 fails? If the proposition fails, policymakers will likely seek other ways to create a larger affordable housing inventory. Those methods might include relaxing the permitting fees and processes required for new construction and proposing amendments to Costa Hawkins for next November. regulation of any form on residential and commercial rent prices in Illinois. Critics of the act say responsible rent-control measures in markets like Chicago could help residents remain in their communities and save money for down payments on a home. Two bills introduced to the Illinois General Assembly this summer would overturn rent control preemption and implement the initial stages of rent control if they pass. What to Watch: While voters will not weigh in via ballot directly, elections of other officials, including the state’s governor, will directly affect whether the legislation in the General Assembly passes in the coming months. Election of more officials who support some form of rent control will likely result in forward movement of legislation to implement such programs in some form. Election of officials who believe rent control may damage the local housing economy and stunt new construction may send those bills back to the drawing board. Repeal of Rent Control Preemption (Illinois) What is Rent Control Preemption? The 1997 Rent Control Preemption Act prohibits
3 Real Estate-Related Factors Emerging in the 2018Mid-TermElections ON OR OFF THE BALLOT, HOUSING POLICIES CHANGE AFTER NOVEMBER.
Issues this November:
Proposition 10/Repeal of the Costa Hawkins Act (California) California passed the Costa Hawkins Act in
1995. Costa Hawkins provides exemption from rent control for rentals built after 1995 and nearly all single- family residences. It also permits landlords to raise rents to market rate levels in the event of a vacancy rather than linking controlled rent rates to a unit (a common practice prior to the implementation of Costa Hawkins). What happens if Proposition 10 passes? Proposition 10 will repeal Costa Hawkins. It does not prohibit rent control in the future, and the repeal could conceivably lead to expanded rent control in cities if local policymakers believe the move will increase the supply of affordable housing. However, this could have the opposite
by Carole VanSickle Ellis
he 2018 midterm elections promise to be contentious. In the midst of the furor over alleged bad behavior on all sides, social media sparring, deep-seated partisan squab- bling, and a visceral reaction to many of the major players in American politics today, housing policy may seem like a relatively calm port in the storm. T
However, shelter is a basic human need, and while real estate may not be quite as controversial in nature as many of the candidates themselves, it will play a role in this election. Investors will best benefit from being aware of the issues and monitoring the results of initiatives on the ballot even if the voting is not happening in their
state. Furthermore, understanding how election results may affect housing poli- cy and the practical aspects of investing, such as the cost of labor and materials, provides investors with another “tool” for market analysis and strategic deci- sion-making. Here, we examine 3 real estate factors to watch in the 2018 midterm elections:
30 | think realty magazine :: november 2018
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