5 Ways Proposition 10 will Hurt Property Owners

  • October 22, 2018
  • News
5 Ways Proposition 10 will Hurt Property Owners

5 Ways Proposition 10 will Hurt Property Owners

California voters will soon have to decide on Proposition 10 on the November 6th ballot. We encourage all California residents to register to vote, before October 22nd, to exercise their rights as citizens and voice their concerns about their communities. Considering each measure will directly affect residents, voters must stay well informed about the measures they are voting on. Rent control is a feel-good solution, a quick fix to a complicated problem that claims to alleviate the housing crisis. This provides for a very shallow understanding of the housing crisis and the effects of Proposition 10. It is crucial to understand the complete complexity of Proposition 10, therefore, we’ve put together the 5 ways Proposition 10 will hurt property owners.

1. Prop 10 will reduce the value of your property.  

Proposition 10 will lead to a reduction in property values throughout the state. California’s Legislative Analyst’s Office reports that the market value of property will decrease regardless of whether the property itself is subject to rent control. Therefore, not only will the value of property go down in regions where rent control is enforced, but properties that do not reside in rent controlled areas will also be affected. Passing Prop 10 will reduce properties in the impacted areas by an average of 20% and all other properties by about 14%. Such a reduction in value will cost California property owners an average of $60,000 in losses. A reduction in property value means these real estate investments will yield less money for families that choose to sell. Allowing for Prop 10 to pass will also incentivize landlords to no longer maintain the condition of their rentals because they will not be producing their highest potential earnings. This will initiate another decrease in the value of their property over time. This reduction in value will also lead to lower quality living spaces for California renters.
2. Prop 10 reduces profits and returns on investment for rental property owners.

Property is a person’s single best investment, however, Prop 10 impedes on an owners’ return on investment of their property. Many property owners invest in property to generate a supplemental income to help make ends meet. Capping the potential of monthly income produced by rents will significantly impede owners’ earnings. Veterans, seniors, and retirees are the most at risk-populations and will be negatively affected the most. Over 71% of veterans are homeowners and many choose to rent their single-family homes for supplemental income during their retirement years or while they reside in assisted-living facilities. Veterans, seniors, and retirees that live on a fixed income will lose out on a portion of that income, putting their economic well-being at serious risk.

3. Prop 10 will incentivize rental owners to convert property to more profitable use.

Because Prop 10 causes rental property owners to reduce their potential to earn a steady return on their investment, owners are incentivized to convert their rental properties to more profitable uses. Owners will be incentivized to convert rental units to non-apartment uses, such as vacation rentals, to be able to earn their highest potential return on their investment. Additionally, Prop 10 eliminates homeowner protections by subjecting homeowners to bureaucrats that add additional annual fees on rental housing These additional fees imposed by bureaucrats further incentives the conversion of rental properties. Unfortunately, even if owners do choose to convert the use of their properties they still may not be able to avoid fees. Bureaucrats can go as far as charging property owners fees for taking their property off the rental market.

4. Proposition 10 negatively affects single-family homeowners.

Proposition 10 not only affects California multi-family property owners, but extends to negatively impact single-family homeowners and renters. The 1995 Costa-Hawkins Act exempts single-family homes from rent control, guaranteeing property owners the right to raise rents to market value once units become vacant. Proposition 10 repeals Costa-Hawkins, which means that governments will be permitted to impose the price for single-family homes, controlling the amount homeowners can charge to rent out their homes, or even rooms in their home. Proposition 10 will eliminate homeowner rights and reduce the rights of property owners to do what they want with their private, personal investments.

5. Proposition 10 negatively impacts small landlords.

Rent control puts money in the pockets of wealthy stakeholders. Many rental owners are “mom and pop” investors with four units or less. These types of property owners invest to earn a supplemental income to help make ends meet. Rent control often does not take into account the wealth of renters, forcing small property owners to subsidize much wealthier tenants who are taking advantage of the law. Therefore, Prop 10 will unfairly penalize small owners. In addition, Prop 10 will force landlords to pay a new rental housing fee on an annual basis, making property owners lose more and more of their income.

Overall, we urge you to VOTE NO on Proposition 10 because of its damaging effects on all California residents and property owners. Proposition 10 reduces the value of property, puts the economic-well being of many communities at risk, and further exacerbating the housing crisis. California needs a more sound measure to alleviate the housing crisis, and Proposition 10 is not that measure.