California votes: On eve of Prop 10, here’s how rent control works in Palm Springs today

Dore Brand remembers a time when, out of the 32 apartments he owns in Palm Springs, almost all of them were under rent control.

Now, he’s down to his last rent-controlled apartment, a two-bedroom, two-bathroom unit on North Belardo Road that he’s rented to the same couple for more than two decades.

They pay about $900 a month. Brand thinks he could refurbish the apartment and lease it for $1,300 at market rate if the couple ever moves out.

“They’re able to stay there because I’m treating them right,” he said. “They’re almost like family to me.”

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As cities around California grapple with rising housing costs, Palm Springs is one of a handful of municipalities with an existing rent control ordinance – though many more have a version of rent control for mobile home parks only.

But because both city and state rent control laws gradually phase out rent-controlled units, the number of apartments and mobile home spaces whose prices are capped has declined from historic highs.

In 1994, 1,300 mobile home spaces and 4,300 apartments were under rent control in Palm Springs, according to a Desert Sun article published that year.

Today, only 20 apartments and 670 mobile home spaces are still registered as rent-controlled under the city’s nearly 40-year-old ordinance. That’s one apartment for every 3,000 multifamily units for rent in the city and one mobile home for every three, according to Census data.

Proposition 10 on the ballot this November could give cities more flexibility to revisit old rent control measures or to form new ones. The measure would repeal the Costa-Hawkins Rental Housing Act, a 1995 law that allows landlords to raise rent to market rate once a tenant moves out, prevents rent control on homes built after February 1995 and generally exempts single-family homes and condos from rent control entirely.

While giving cities and counties the ability to establish local laws governing rent increases, Proposition 10 also requires that rent control laws “allow landlords a fair rate of return.”

Costa-Hawkins does not apply to the owners of mobile homes or mobile home parks; other state laws set standards for mobile home residents and landlords.

Proponents of the initiative to repeal Costa-Hawkins, including the California Democratic Party, say it will open the door for cities and counties to use rent caps to help Californians squeezed by rising rents. Critics of the measure, including some real estate developers, argue new or expanded rent control ordinances will only exacerbate the state’s housing shortage by creating a disincentive to invest in new housing construction.

Palm Springs city council members interviewed for this story said they hope to review the city’s rent control ordinance in the future, especially in light of Proposition 10. But they also said they’ll consider any changes to the current rent control ordinance cautiously, as one component of the city’s housing policy.

Palm Springs’ rent control policy is relatively limited today.

To start, a rental can be subject to rent control only if it rented for less than $450 per month as of September 1, 1979.

In addition, Palm Springs’ ordinance exempts several categories of real estate from rent control, including rentals owned, managed, operated or subsidized by any governmental agency, rentals that began construction on or after April 1, 1979 and rentals with four units or less, one of which occupied by its owner.

The ordinance also does not apply to medical facilities, recreational vehicle parks and commercial rentals.

If all of those conditions are met, the city ordinance caps annual rent increases at no more than 75 percent of the change in the cost of living since September 1979.

Landlords can then petition the city for the right to increase rent to a different figure, if they prove they have not received a “fair return” on their property.

The structure of the city ordinance itself is one reason why the number of rent-controlled properties is declining in Palm Springs over time. Except for mobile home spaces, when a tenant moves out of a rent controlled home in Palm Springs, the landlord can charge whatever the market will bear to the tenant taking their place, which is consistent with Costa Hawkins.

Since 1994, the number of rent-controlled apartments in Palm Springs has plummeted from thousands of units to less than two dozen.

The units still registered with the city today are scattered in ones and twos across the city. Some are nestled in larger complexes, like a lone rent-controlled dwelling in a 176-unit property on South Sunrise Way. And some are tucked into smaller communities.

George Craig purchased a five-unit apartment complex in 2013. One of the units is under rent control, but Craig said he wouldn’t hesitate to buy another property in Palm Springs with some rent-controlled units again.

“We bought it with our IRAs, so we don’t have the mortgage to worry about,” he said. “And we have a positive cash flow right now – (although) not much.”

Dore Brand, the landlord with the single rent-controlled apartment on North Belardo, said he worries that if rent control practices become stricter again, landlords like him won’t have an incentive to replace appliances, keep landscaping neat or give their buildings a fresh coat of paint.

“Why should I put in improvements if I can’t get a realistic return on my investment?” he said.

Brand doesn’t support rent control, but if forced to operate under it, he said he would prefer an ordinance that allows him to increase rent to market rate after a tenant moves out, and then allows rent increases thereafter to at least match increases in the cost of living. 

Rent controlled units in Palm Springs have declined at mobile home parks, too, falling about 48 percent since 1994.

And with fewer rent-controlled properties of all kinds in the city, public interest in the issue has waned.

The rent review commission did not meet at all in 2017 or 2018, according to the city, and the last meeting agenda posted for the commission online dates to September 2016. The city is currently advertising to fill four vacancies on the five-member commission, which is tasked with settling disputes between landlords and tenants.

“I suspect there are large numbers of people, both renters and landlords, that are not even aware that we have an ordinance,” said Councilmember Lisa Middleton, who sits on the city’s Affordable Housing Subcommittee.

Not too long ago, rent control was the subject of fierce debate in Palm Springs. 

The city passed its first mobile home rent control ordinance in the late 1970s, setting it to expire in 1980.

But voters wanted something more comprehensive. In 1980, about 3,400 registered voters in the city at the time signed a petition to put a broader rent control measure on the April ballot.

The Desert Sun called it “undoubtedly the most emotional and controversial issue” facing voters that year.

Eli Birer, then-president of the Palm Springs Board of Realtors, told The Desert Sun at the time that the initiative would result in “no further building of apartment houses in the city.”

But Percy Aucoin, one of the people spearheading the initiative, said rent control was a tool meant for “the low-income people, the people on fixed incomes” – people like Aucoin, who had watched asking rent at his mobile home park climb from $105 a month in 1975 to $225 in 1980.

Voters ultimately sided with Aucoin, passing the rent control initiative with 55.7 percent in favor. It appeared to be “the first of its kind in a small affluent city such as Palm Springs,” The Desert Sun reported. 

Over the following two decades, Palm Springs would continue tinkering with its ordinance – including allowing landlords to revert rentals to market rate after a tenant moves out.

In 1995, California passed Costa-Hawkins – effectively preempting Palm Springs from expanding rent control beyond properties already exempt under city code.

Middleton supports the repeal of Costa-Hawkins. But she said rent control can be “a balance that’s difficult to get right” and should be considered in the larger scheme of housing policies designed to provide more affordable places to live.

“There are numerous examples of where rent control has provided financial security to very vulnerable individuals,” she said, “and there are numerous examples of where it has worked to reduce the incentive of individuals to build more housing.”

Peter King, an Assistant City Attorney, said Palm Springs is currently researching other cities’ rent control ordinances, as well as compiling a list of properties that should be subject to rent control. 

“We’re doing a double check to make sure we’re capturing the units that, if not registered, should be registered,” he said. “That, quite frankly, is a very difficult task.”

Besides researching rent control, Palm Springs has recently sought to protect tenants in another way. In April, the city extended an interim ordinance providing relocation assistance to tenants of multifamily properties displaced when their buildings are converted into condominiums, hotels or other uses.

Mayor pro tem J.R. Roberts said he’s worried Palm Springs could become a city for wealthy residents alone if developers don’t build more affordable rentals. He would like to see the city use “a cafeteria of incentives” – tax breaks, a cut in city fees or other perks – to encourage construction.

“Even if rent control holds,” he said, “it’s not going to solve the problem because there are no rentals.”

Amy DiPierro is a real estate and business reporter at The Desert Sun. You can reach her at amy.dipierro@desertsun.com or 760-218-2359. Follow her on Twitter @amydipierro.