The Future of Housing (Part 1 of 3)

The proposed legislative solutions place a greater weight on rental property owners than developers.”

(Editor’s Note: This is Part 1 of a 3-part article. Parts 2 and 3 will appear in the October and November issues, respectively, of the Apartment Journal.)

With hundreds of cities and counties across America trying to deal with a dearth of housing stock, public officials at all levels are getting involved. Whether these policymakers are in the early stages of debate or actually implementing changes, rental property owners are being painted as the villains. As long as that narrative continues, the ones with the most to lose will continue to be left on the outside of the discussion, with minimal opportunity for feedback. California Strategic Advisors has written a 3-part series that examines the future of housing and provides viable solutions to ensure rental property owners are substantial players in the process. Part 1 will examine the current housing climate.

While campaigning, Governor Newsom stated he would address the housing shortage in California by committing to the development of 3.5 million new homes by 2025.1 Eight months later and experts have noted that there has been a 16 percent decrease in housing production compared to last year. Attempts, such as withholding funds from local governments that do not approve new housing, have been greatly watered down with many believing the new policy has no enforcement mechanism and is unlikely to yield results.2

The situation from last year has been exacerbated by increased material costs, new and higher government fees, placement of new density requirements, heightened neighborhood resistance, shortage of construction workers, impact of housing in high fire severity and flood zones, and restrictive lender requirements. These are systemic problems that cannot be fixed with a new law and we will continue to struggle with housing afford ability and availability next year and arguably for the next decade. To be taken seriously, we must focus on our deep intellectual understanding of the issues. With over decades of experience, we must leverage our knowledge base to become the subject matter experts on housing.

The proposed legislative solutions place a greater weight on rental property owners than developers. This year, the Assembly Housing Committee estimated that over 200 housing bills were introduced by legislators. Solutions like SB 50 (Weiner), which would remove single-family zoning in areas within a quarter mile of a transit stop, seek to create state control over zoning issues typically left to local governments.3 While the bill died in Senate Appropriations for this year, many legislators publicly claim they will push for it to be passed next year.4 Senator Weiner’s proposed solution would not create immediate relief, but it would be a boon for developers as multifamily units have proven to be a greater windfall than single-family homes. Other state legislators have sought to focus on the current costs of rent. Assemblymember Wicks, a Democrat from the East Bay, took a “softer” approach (stated by the author) and pushed for a statewide registry on all rental properties in the state.5 Such an approach delays a solution but equips the Legislature with data to push for harsh regulation on rental property owners.

Assembly Member David Chiu, another Bay Area Democrat, introduced by far the most extreme attack on rental owners: AB 1482 would place a cap on rental increases throughout the state with a minor exception, while al low ing local counties to make the cap as low as they believe is reasonable6, im poses state wide just cause, removes the ability of prop erty owners to terminate ten ancy, and requires property owners to pay tenants relocation fees.

None of these solutions increase housing in the short term, but they do an excellent job of shifting the burden away from those charged with ensuring California takes care of all its citizens.

The media has certainly contributed to the fearmongering of housing but to suggest it is all fake news would be a gross overstatement. Solely blaming the media is non-sensical when respected bodies like the United Nations has declared the homelessness issue in San Francisco a human rights violation.7 Specifically, the UN report criticizes San Francisco and Oakland for their denial of basic services to many residents in encampments across the Bay Area.8 Note that the critique was not focused on the rent being too high. Truthfully, that assessment can be applied to most areas in California due to a severe lack of a safety net for homeless. The reason this has become a rental owner’s problem is likely due to others that claim they became homeless due to the high rise of rent and evictions. As Forbes.com recently noted, the media is playing “fast and loose with eviction data;” sadly, Forbes is correct that the eviction data is being misused to paint a picture of rental owners as the problem.9 However, just because the media is confusing correlation with causation does not mean that housing issues are completely fabri cated. Forbes suggests combatting this exag gerated narrative with more facts and data, but in politics a good emotionally tinged story sells far better than empirics. When thousands of people are rallying across the state, it tends to heavily influence Legislators. Understanding that simple truth is how we can move from the outside to be the first ones to be called for advice on how to address the problem.

The biggest problem for rental property owners is their image. Right now “landlord” is the nice term for owners by many in the California State Legislature, even though we know that terminology is fraught with its own negative connotations. This characterization has allowed housing advocates to suppress rental property owners’ voices and in turn remove owners from the policymaking process. Lobbyists can articulate your points, but when the general perception is that owners are the villain, it is increasingly difficult to offer substantive solutions and be taken credibly. Let’s be clear, rehabilitating the rental owners’ image will not require millions in funding or a brand-new PR campaign. Instead, it requires rental owners to be seen as one of the groups willing to engage and fight for a solution. In the past, as Part 2 will detail, owners have been proactive supporters of positive change. Owners must highlight and demonstrate sympathy of tenant issues, and illustrate the times where we have fought with, not against, housing advocates.

Owners know tenants matter and are deeply concerned with the lack of housing in California; demonstrating that will ensure our side is called before state and local legislators introduce changes to our laws and provide us with a legitimate seat at the table. The current “reactionary” approach only distances our side from the policymakers, and it is in stark contrast of our history. Refocusing our narrative and place in these conversations is not as hard as it sounds, but it starts with remembering the positive things we have sponsored and supported to ensure tenants are provided a safe and affordable space to live.

1 L.A. Times Editorial Board (2019, August 4). Editorial: In the midst of California’s housing crisis, construction slows and lawmakers stall. Retrieved from https://www.latimes.com/opinion/story/2019-08-02/housing-crisis-permits-california
2 Id.
3 Hughes, A. (2019, March 28). Senate Committee on Housing Bill Analysis: Senate Bill 50. Retrieved from https://leginfo.legislature.ca.gov/faces/billAnalysis Client.xhtml?bill_id=201920200SB50
4 Libby, S. (2019, May 31). Sacramento Report: The New Front in the SB 50 Battle Is Toni Atkins’ Wikipedia Page. Retrieved from https://www.voiceofsandiego.org/topics/government/sacramentoreport-the-new-front-in-the-sb-50-battle-is-toni-atkinswikipedia-page/
5 Wicks, B. (2019, February 19). Assembly Bill 724. Retrieved from https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200AB724&search_keywords=housing+registry
6 Chandler, J. (2019, July 10). California rent control bill advances in Senate. Retrieved from https://la.curbed.com/2019/7/10/20687569/california-rent-control-bill-advances-in-senate
7 Graff, A. (2018, November 5). United Nations report: SF homeless problem is ‘violation of human rights’.
Retrieved from https://www.sfgate.com/bayarea/article/rapporteur-United-Nations-San-Francisco-homeless-13351509.php
8 Guterres, A. (2018, September 19). Report of the Special Rapporteur on adequate housing as a component of the right to an adequate standard of living, and on the right to non-discrimination in this context. Retrieved from https://www.undocs.org/A/73/310/rev.1
9 Valdez, R. (2019, May 28). Changing The Housing Debate Part 2: There Is No Eviction Epidemic. Retrieved from https://www.forbes.com/sites/rogervaldez/2019/05/28/part-2/#58528682cc6d

Ron can be reached at ron@calstrategic.com