Prop 33 Will Decide Future of Rent Control in San Francisco

San Francisco could extend rent control to 40% of its renters if voters approve Proposition 33 this November.

Jordan B.
September 17, 2024

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Good morning. San Francisco is proposing to extend rent control protections to thousands more renters—roughly 40% of the city’s rental population—if voters statewide approve Proposition 33 in November.

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RENTAL POLICY

SF Rent Control Expansion Tied to State Vote, Could Impact 40% of City Renters

San Francisco is preparing to extend rent control to thousands of additional renters, but only if California voters approve Proposition 33 this November.

Sweeping rent control: Board of Supervisors President Aaron Peskin is introducing an ordinance to extend rent control to multifamily buildings constructed between 1979 and 2024. This would be the city’s largest expansion of rent control since the 1970s, covering 40% of renters currently unprotected due to the 1995 Costa-Hawkins Act. The measure only takes effect if Prop 33, which seeks to repeal Costa-Hawkins, passes.

Economic concerns: Developers argue the expansion could freeze new housing developments, which is critical as the city faces a state mandate to approve 82,000 new housing units by 2031. Rents are already down by 17% from 2019, and inflation continues adding costs. Critics like developer Oz Erickson warn that extending rent control could further depress investments in the city’s housing market.

Apartment rents in the San Francisco Bay Area falter in August

Tight race: Statewide polling shows mixed support for Prop 33. A UC Berkeley survey found 40% of voters back the measure, 34% are against it, and 26% remain undecided. Prop 33’s fate is uncertain, especially with strong opposition from landlord groups like the California Apartment Association, which views the proposition as "extreme" for potentially allowing cities to enact vacancy controls. In 2018 and 2020, California voters rejected similar measures seeking to beef up rent control protections.

➥ THE TAKEAWAY

Big picture: San Francisco's rent control expansion debate spotlights a key outcome for investors and developers that could reshape the housing market. As Jay Parson notes, "Supply risk is predictable and temporary, but policy risk can be unpredictable and permanent." Proposition 33 could destabilize the housing market, much like St. Paul’s experience, where one election cycle drove away developers. Ultimately, policy risks often shrink the housing supply, harming renters in the long run.

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✍️ Editor’s Picks

Sustainable success: Carlyle has acquired a minority stake in North Bridge ESG LLC and is committing up to $1B to finance clean energy projects for landlords.
Back to work: Amazon CEO Andy Jassy is mandating corporate staff return to the office five days a week, shifting from the previous three-day requirement and streamlining management to boost efficiency.
Retroactive funding: C-PACE financing allows projects to retroactively finance key components from the past 1-3 years, providing liquidity for reserves, cost overruns, and mortgage payments.
Navigating normalcy: After years of disruption, the Dallas-Fort Worth real estate market is showing signs of a return to seasonality, with inventory stabilizing and the possibility of a Fed rate cut.
Silver screen evolution: The LA Planning Commission approved the redevelopment plan for Television City, which adds 1.7 MSF of soundstages, offices, and shops while preserving studios.
Aggressive cut: Bill Dudley argues that the Federal Reserve should aggressively cut interest rates by 50 basis points to address recession risks and align with market expectations.
Colleges embrace RE: Faced with declining enrollment, increased competition, and funding challenges, universities are turning to private real estate developers to stay competitive and meet sustainability goals.

🏘️ MULTIFAMILY

Affordable expansion: A joint venture added 164 affordable homes to the $1B Dublin Commons project in San Francisco, while also setting aside land for senior housing.
Building bubble bursts: In Q4, apartment construction in NYC is seeing a significant slowdown, on pace to plummet by nearly 80% year over year.
Renting richer: The top 5% in the US—those making $750K a year in household income or more—are all turning from owning to renting, with their share of renters jumping up 3.7% in 2022.
Multifamily marvel: Gindi Equities just sold Cedar Ridge Apartments, with 104 units in Gastonia, NC, for $13.5M after renovations.
Build-to-rent: Middleburg Communities is pushing ahead with its eighth build-to-rent project, Quail Crossing, seizing opportunities as the sector faces a slowdown in new developments.

🏭 Industrial

Industrial deceleration: Southern California's once red-hot industrial markets are softening, with rising vacancy rates and falling lease rates, despite solid rent growth.
Building on success: Brennan Investment Group expanded in Chicago with its 740 KSF Yorkbrook Business Park acquisition in DuPage County.

🏬 RETAIL

Retail renaissance: Open-air, necessity-driven shopping centers have hit bottom in value, signaling an opportunity as strong retailers thrive and demand for physical stores rebounds.
Holiday hiring: Target (TGT) is preparing for the upcoming holiday season with a 50% larger assortment of holiday products, thousands of low-cost items, and hiring more help 100 days ahead.

🏢 OFFICE

Life science surge: Alexandria Real Estate Equities has sold a 100 KSF life science building in Seattle’s Lake Union area to Fred Hutch Cancer Center for $150M, while forming a joint venture for two neighboring properties.
Smaller footprints: KPMG (KPMG) leased 96 KSF at Foundry Square III in San Francisco, downsizing from 143 KSF, or a 32.6% footprint reduction.
Building up Dallas: Gulf Coast Western and Enverra Real Estate Partners purchased a 230 KSF North Dallas complex, and are planning for up to $9M in renovations for the 45% leased property.

🏨 HOSPITALITY

Luxury oasis: Hospitality mogul Sam Nazarian and Tony Robbins team up for The Estate, a luxury wellness concept blending hospitality and medical services, targeting a $5.6T industry.
Elevating NYC: Kimpton Hotels & Resorts (IHG) is partnering with Extell on a 529-key project next to Rockefeller Center, set to open late next year.

📈 CHART OF THE DAY

Nearly half of U.S. renters spent over 30% of their income on housing in 2023, with some ethnic households hit hardest, as median rental costs rose faster than home values, according to Census data.