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The 1995 Costa-Hawkins Act, outlawing local rent control statewide, is a favorite target of tenant activists, but with no consideration for consequences and merely because they believe that it has caused rents to soar. Mounting evidence, however, points to the opposite, that rent control: 1) does NOT keep rents low, and 2) protects only long-term tenants, not those who stay for just a few years.

A repeal of Costa-Hawkins would impact all San Francisco rental properties, but we focus here on just two types: tenancies in common (TICs) and condos.

Costa-Hawkins bans vacancy control, which limits an owner's ability to set rents for a new tenant. Rent control limits an owner's right to raise rents only on existing tenants, but not new ones. It also bans rent control on single-family homes, condos, new construction built after January 1, 1995, or any building exempt from local rent control prior to that date. Costa-Hawkins thus effectively froze all local rent control laws as they existed up to January 1, 1995. In San Francisco, this has meant that anything built after 1979 is exempt from the Rent Ordinance.

A TIC is a private contractual agreement between individuals to own proportional interests in a building on one parcel, while a condominium is a subdivided parcel—a building divided into several units, each separately owned and surrounded by jointly-owned common areas.

For example, in a three-unit TIC building that is owned by three people, each owner has a contractual interest in one third of the building. However, the building remains on one lot, and is legally considered one parcel.

Each person can obtain a loan on his or her fractional interest in the building, and that interest can be foreclosed on by the lender. The parties have a contractual agreement to manage the common areas.

Nothing is recorded with the county, and there is no legal subdivision of the parcel. In contrast, in a three-unit condo building the lot that the building is on is subdivided into three parcels and the building's common areas are shared. Each division is recorded, and each condo is legally separate. The Codes, Covenants, and Restrictions (CC&Rs) govern how the parties manage and use the common areas.

TICs and condos in a Post-Costa-Hawkins SF
Over the years, the market for TICs has grown because San Francisco's draconian condo conversion restrictions have made TICs more attractive. It's more affordable to buy just one portion of a building, as one would buy a condo, rather than a whole building. These restrictions were implemented with the stated aim of preserving the City's stock of rent-controlled units. However, in keeping with the law of unintended consequences, increased rent control protections, while maintaining severe condo conversion restrictions, lead to more TICs. More TICs means more homes for sale and fewer for rent. They also force some owners to invoke the Ellis Act and the subsequent sale of the individual units as TICs.

If the TIC'd building was built before 1979, it is subject to the Rent Ordinance; most TICs in the City are. Under certain circumstances, San Francisco condos are protected by eviction control but not rent control. New condos are exempted from rent control. That would all change if Costa-Hawkins is repealed.

If Costa-Hawkins were repealed, the San Francisco Board of Supervisors would be free to expand rent control to new construction—essentially any condo or building constructed after 1979. Such a change would limit a condo or TIC owner's ability to raise rent on existing tenants—the rent control we have now applies only to pre-1979 condos and TICs. This one change alone could have serious negative ramifications for the San Francisco rental housing market.

There is no doubt that wiping out the post-1979 exemption and extending rent control to all the City's rental units, including all future ones, would create a significant disincentive for new construction. Our supervisors seem ignorant of a key fact: that exempting post- 1979 properties was an important and necessary compromise, because the pro-rent control people at the time had enough common sense to realize that failing to do so would discourage construction of much needed new housing.

Vacancy control: the ultimate housing killer
For opponents of Costa-Hawkins, vacancy control is the next logical step in their ceaseless campaign to weaken property rights. Vacancy control would take away a TIC or condo owner's ability to rent to a new tenant at market rate—rents for any tenant would be determined by the City. Rent control on new construction coupled with vacancy control would deal a real blow to developers considering new housing construction in the City.

Will the self-destructive cycle continue?
The repeal of Costa-Hawkins would further this neverending self-destructive cycle by our local government: rent control led to more condos, which led to more condo restrictions, which led to more Ellis Act evictions, which led to more TICs, which led to higher rents. Yet, if given the opportunity, our Board of Supervisors will increase rent control protection which will only perpetuate this cycle. While the stated goal of Costa-Hawkins repeal advocates is to bring rents down and increase the supply of rent-controlled housing, their success would have exactly the opposite effect.

The Board of Supervisors and its incessant quest to protect tenants has caused more problems than Costa- Hawkins. The problem's not Costa-Hawkins—it's the Board.