Rent control

California Rent Control Ballot Initiative Goes Down in Flames. Free Marketers Should Not Be Too Hasty in Celebrating Its Demise.

Prop 10 is dead, but support for rent control is alive and well in the Golden State.


Marian Mocanu/

Californians walked back from a ledge Tuesday by roundly rejecting a ballot initiative that would have opened the door to more rent control. Some 61 percent of Golden State voters rejected Prop. 10 last night. The initiative would have repealed Costa-Hawkins, a state law limiting the ability of cities to impose rent control on new construction and single-family homes.

The result is not a huge surprise. Polling from the Public Policy Institute of California (PPIC), a non-partisan think tank, showed some two-thirds of voters opposed the measure.

Prop 10's thumping at the polls is good news for Californians. The consensus opinion among economists, on both the left and right, is that rent control reduces the supply of housing and fuels gentrification by deterring new construction and incentivizing landlords to convert their rental properties into pricier for-sale units.

Still, chalking up Prop. 10's defeat to voters' embrace of sensible economics would probably be a mistake.

That same PPIC poll showing widespread disapproval of Prop. 10 also found that rent control in general was quite popular, with 52 percent of likely voters agreeing with the statement "rent control is a good thing." That included 69 percent of Democrats, 45 percent of independents, and 34 percent of Republicans. Similarly, a USC Dornsife/Los Angeles Times poll from September found that 28 percent of respondents (a plurality in that particular poll) blamed California's high housing costs on a lack of rent control. Only 13 percent of respondents attributed costs to a lack of housing construction, fewer than the percentage of people blaming things like the influence of the tech sector or foreign buyers.

So why did Prop 10 fail?

Part of the explanation might be the slightly confusing nature of the ballot initiative itself, which would not have actually imposed rent control, but would instead have repealed an obscure law most voters have likely never heard of.

It didn't help matters that the ballot language for Prop 10 mentions the potential for a "net reduction in state and local revenues of tens of millions of dollars per year in the long term" thanks to a likely fall in property values, and thus property taxes, that would come with any expansion of rent control.

The Yes on Prop 10 folks themselves are blaming the huge amount of money spent by the No campaign.

Real estate interests and developers raised some $75 million for the No on Prop 10 campaign, compared to the $25 million collected by Prop 10 proponents. That gave the No's a big edge in the information game.

Michael Weinstein, CEO of the AIDS Healthcare Foundation—which has recently gotten into the affordable housing development arena, and contributed some $23 million to the Yes side—pinned the loss on "corporate billionaires" in a post-election conversation with The Los Angeles Times.

Weinstein himself is a controversial figure. The New York Times called him the "the Koch brothers of public health" because of his deep pockets, ideological purity, and history of zealously pursing policies opposed by many would-be allies in the AIDS activism world. Weinstein's own idiosyncrasies and his willingness to go it alone on Prop 10 reportedly angered many in the pro-rent control camp, dampening their enthusiasm for the measure. Here's how Joe Eskenazi, a reporter for San Francisco publication Mission Local, wrote about the fissures in the Yes campaign back in October:

"Organizers here have all fallen behind Weinstein's lead. But, on background, some questioned if this was the right year to for a statewide battle; perhaps a few more years of successes on the local level would have galvanized a movement. Northern California organizers also expressed some frustrations at, essentially, taking marching orders from an 'egotistical billionaire' from L.A. writing all the checks."

It didn't help matters that Gavin Newsom, the Democrat who won California's gubernatorial race Tuesday, opposed Prop 10 while also dangling the possibility of legislative action on rent control in the new year. That may have lowered the stakes in the election.

At the end of the day, these factors were enough to see Prop 10 lose in a landslide.

Free marketers who worry about the consequences of expanded rent control should wait to break out the champagne, however. Given broad popular support for rent control, as well as a stated willingness among the incoming governor's administration to work on compromise legislation in the future, it is likely the specter of rent control will continue to haunt California housing policy for years to come.