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Moving Forward in the Golden State

The most talked about referendum on affordable housing this election season was Proposition 10, in California. Its success at the polls would have meant the repeal of Costa-Hawkins, state-wide legislation first passed in the 1980s regulating rent control. Municipalities would suddenly have received the ability to draft, debate, and potentially enact their own rent control laws. Despite much speculation about how a vote to repeal would affect multifamily investors, individual homeowners, and renters, the Proposition failed at the polls.

Other Election Day results

Proposition 10 failed to pass, but other efforts to improve access to housing in California were approved by voters. Proposition 1 will funnel some $4 billion in proceeds from state bonds to finance the construction of new affordable housing specifically for veterans, farmers, and various low-income groups. Voters also signaled their approval of Proposition 2, which is aimed at providing improved housing for the homeless. Both Propositions are popular with voters and with those in the multifamily industry, and received support from companies including Essex Property Trust and Equity Residential.

Moving Forward in the Golden State

Beyond Propositions 1 and 2, activists remain hopeful about other solutions to California’s housing crisis. SB-50, a revised version of another bill first proposed in 2017, would allow developers to build with increased density in areas with ready access to public transportation, and prevent cities from banning construction in certain areas. In some cities, this bill would mean the replacement of single-family homes with larger, multi-tenant structures, while others would see increased density in areas and neighborhoods already zoned for multifamily. The bill has won support in part due to its focus on wealthier neighborhoods where the high cost of land means single-family homes are not necessarily the best use for existing lots.

This legislation gels with Gavin Newsom’s vision for California. The governor-elect has pledged to expand housing permits in the state, with a goal of 3.5 million new residential units by 2025. The future governor’s goals and the potential passing of SB-50 meaning the state is still a goldmine for developers hoping to introduce more market-rate housing stock, provided they’re attentive to any legislation that Newsom and others could potentially introduce. In particular, developers and investors should remain wary of those who still advocate for rent control reforms. These activists face stiff opposition from developers, investors, and homeowners, making the passing of a future version of Proposition 10 unlikely, but it is nevertheless possible.

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