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California Proposition 98 and Rent Control II - Why Bundling Rent Control and Eminent Domain Reform Was a Political Mistake:

In my last post on California Proposition 98, I explained why its phaseout of rent control would have only a modest impact - one that is likely to be positive. In this one, I will suggest that the inclusion of rent control in an initiative primarily focused on protecting property rights against eminent domain was nonetheless a serious tactical error. By greatly reducing the chance that Prop 98 will pass, making property rights advocates seem dishonest, and closing off possible alliances with groups on the left, the "bundling" of rent control and eminent domain issues has done more harm than good - even from the standpoint of those who favor the abolition of rent control (as I do).

I. Including Rent Control Reduces the Chance of Passage.

Proposition 98's sponsors were not totally wrong to hope that their initiative might pass even with the rent control provision included. Back in 1995, Massachusetts voters abolished rent control in a stand-alone referendum; as MIT economist Henry O. Pollakowski showed in this study, the Massachusetts referendum predictably led to an expansion in the quantity and quality of housing available in Massachusetts cities that had previously been subject to rent control. If that could happen in one of the country's most liberal states, the Prop 98 forces could reasonably hope that it could also happen in California as part of an initiative bundling rent control with the vastly more popular issue of restricting eminent domain authority.

Nonetheless, given the popularity of rent control, including it in the initiative at least significantly reduced the chances that Prop 98 would pass. Experience with eminent domain referenda in 2006 shows that they pass by overwhelming margins if limited to banning government efforts to condemn property for "economic development" and other similar purposes (as occurred in Kelo v. City of New London). All nine "clean" anti-Kelo referenda on the ballot in 2006 passed easily. By contrast, two of the three referenda that tried to bundle anti-Kelo laws with more controversial restrictions on "regulatory takings" were defeated. Significantly, one of thes failed initiatives was California's Proposition 90, which was defeated by a narrow 52-48 margin. I summarized this data in a November 2006 post, where I concluded that "[t]ying anti-Kelo referenda to the much less popular regulatory takings referenda has turned out to be a serious political mistake." Bundling the anti-Kelo cause with an anti-rent control initiative is risky for similar reasons.

II. The Disastrous Interaction with Proposition 99.

Even so, it is possible that Prop 98, as written, could have succeeded if it were the only eminent domain initiative on the ballot. Rent control has fewer avid supporters than the many different regulatory programs potentially affected by Proposition 90.

Be that as it may, the situation changed radically once Proposition 99 - the rival intiative sponsored by pro-condemnation forces - entered the picture. Prop 99 greatly increased the difficulty of passing Prop 98 in two ways. First, as I have documented in my LA Times op ed, it would invalidate Prop 98 even if the latter also passes - so long as 99 gets the greater number of votes of the two. This means that Prop 98 can't be enacted unless it not only gets a majority, but more votes than Prop 99. Most voters are unlikely to realize the technical legal connection between the two ballot measures and are likely to support Prop 99 simply because it seems like a measure that will genuinely protect property rights against takings (even, though, as I explained in the LA Times piece, it won't actually do so).

Second, Prop 99 gives voters an apparent way to protect property rights without also taking on the rent control issue. Nonexpert voters are unlikely to realize that Prop 99 is deliberately structured to avoid giving property rights any real protection. This too increases the odds against Prop 98, and may be enough to cause its outright defeat.

The Proposition 99 ploy is so cleverly designed that it might have doomed Proposition 98 even if the latter didn't include a phaseout of rent control. With rent control included, failure becomes almost certain. Proposition 99 has been in the works for a long time. I first blogged about it more than a year ago. It was a mistake for Prop 98 advocates not to take it more seriously from the start.

III. The Dangers of Appearing Deceptive and Undermining Potential Alliances with the Left.

The inclusion of rent control in Prop 98 is also politically damaging for two other reasons. First, it exposes property rights supporters to charges of lying and deception. And such charges have in fact been repeatedly made by opponents of Prop 98, who have focused their campaign almost entirely on the rent control issue. For reasons I outlined in this post, I think that the charge of deception is wrong or at least greatly overstated. The sponsors of Prop 98 don't deny that it will phase out rent control; the official Prop 98 website specifically notes that it will. They merely focus on other more popular aspects of the initiative in their public rhetoric. Certainly, any deception by the Pro-98 side pales in comparison to that practiced by the sponsors of Prop 99, who are promoting an initiative intended to achieve the exact opposite of its stated objectives.

Nonetheless, the charge of deception is easy to make and impossible to refute in a succint way that ordinary voters can quickly grasp. It effectively diverts public attention away from the issue of eminent domain, and from the far greater deception perpetrated by the sponsors of Proposition 99. Since the Pro-99/Anti-98 side includes most of California's political establishment and major media outlets, these were predictable results. Like Caesar's wife, the cause of property rights must not only be pure; it also has to be perceived as such. That imperative is particularly important when the other side has vastly greater resources and media support.

Finally, the inclusion of rent control in Prop 98 closed off potentially promising alliances with forces on the political left. As documented in Part I of my academic article on post-Kelo reform, the Kelo decision and economic development takings are extremely unpopular among many liberals and leftists because they tend to victimize the poor and minorities. Ralph Nader, Bill Clinton, Howard Dean, Maxine Waters, and the NAACP (all cited in the paper) were among those who denounced Kelo in very strong terms. Surveys (also cited in the paper) show that 77 percent of self-described liberals oppose Kelo, and almost as many favor state laws banning economic development takings.

On the other hand, most liberals also strongly support rent control. An initiative that packages the anti-Kelo effort together with a rent control phaseout is likely to forfeit the support of many liberal voters who would be willing to support a pure anti-Kelo measure. In a generally liberal Democratic state like California, that is a major political drawback. It is particularly serious in a vote that takes place on June 3, where the absence of major statewide races leads to a low turnout - thereby ensuring that ideologically more extreme voters (who turn out at higher rates than moderates) will be a higher percentage of the total. Obviously, a liberal state like California has many more strongly ideological liberals than conservatives and libertarians.

Worse still, the bundling of rent control and eminent domain reform will lead many liberal activists to think that conservative and libertarian opposition to Kelo is just a cover for other causes that liberals oppose. That might reduce their willingness to ally with us on property rights issues in the future, not just in the case of Proposition 98. As a result, Proposition 98's bundling of rent control and eminent domain reform might have negative effects that go beyond Prop 98's own probable failure. I'm not sure how serious those effects are going to be. But I doubt they will be completely negligible.

TomB (mail):
Thank you Professor. You're about the only honest player on either side of either initiative, as far as I can tell. Too bad that politics as usual was the baseline for 98 instead of an honest, single-issue proposal to roll back Kelo. I certainly hope they both lose and you can start over.
5.21.2008 7:06pm
Smokey:
Yes, bundling rent control language in with this otherwise excellent Prop 98 Kelo deconstruction was a blunder. It gave an opeining to the big government proponents of Prop. 99, which would never pass on its own merits, since it legitimizes, and actually strengthens Kelo.

The direct result of 99 will be the mass eviction of tenants from those buildings that remit property taxes which, in the view of ravenously greedy local politicians, are 'too low'.

If 99 passes, politicians will have the green light to condemn older apartment buildings -- where the poorest tenants reside. Developers will waste no time in pointing out to the local pols the higher tax collections that will result from condemning older buildings. Construction unions are the third leg of this triumvirate of evil [evil to the poorest tenants, anyway], since unions will get more work, more members, and more dues.

The developers will make their money and move on. The pols will buy more votes with the ill-gotten tax gains. But the tenants? The tenants will be evicted. They are simply in the way.

[side note: when Prop. 13 passed, I voluntarily lowered the rent of each of my 40+ units by $25 a month; that rent reduction passed on all of the Prop. 13 savings to my tenants. Right after Prop. 13, rent control was passed, which lowered the property value since any future increases were based on a cap rate related to the current rent roll. I finally sold my last building in 2002, and the new owner immediately raised the average rent from just under $700/month to $1,300/month. The major reason I had been able to keep rents low was directly due to the substantially lower property taxes resulting from buying the building in the early '80's, and Prop. 13. Many of my tenants had been in those apartments for over 25 years. Now they've all been forced to move, who knows where?]
5.21.2008 7:12pm
R_B (mail):
Prop 99 is also harmful in that it's causing people who would not vote for it (for all of the reasons you list) to vote for it just to save rent control since there
are 2 ways to save rent control: 1) Defeat Prop 98, 2) Give Prop 99 more votes than Prop 98. #2 provides an incentive for people (like myself) who like rent control to vote for 99 even where I normally wouldn't.
5.21.2008 7:15pm
OrinKerr:
The sponsors of Prop 98 don't deny that it will phase out rent control; the official Prop 98 website specifically notes that it will.

Ilya, I'm not sure I'm completely convinced that Prop 98 supporters are being that direct about it. The page you link to offers the following summary:
* Private property may not be taken by eminent domain for private use under any circumstances (e.g. to build a shopping center, auto mall or industrial park).

* Property may be taken by eminent domain only for public use (e.g.. freeway construction, parks, or schools).

* Property may not be taken by government and used for the same purposes (e.g. residential housing cannot be used for government housing).

* Family farms and open space are protected from seizures by government for the purpose of selling the natural resources.

* If a public agency takes property under false pretenses, or abandons its plans, the property must be offered for sale to the original owner at the original price and the property tax would be assessed at the value of the property when it was originally condemned.

* If farmers or business owners are evicted by eminent domain, they would be entitled to compensation for temporary business losses, relocation expenses, business reestablishment costs and other reasonable expenses.

* Government may not set the price at which property owners sell or lease their property. However, tenants who live in rent-regulated communities will continue to receive the benefit of those regulations as long as they live in their residences.
As I read this, the last paragraph is the one about rent control. But it doesn't say that Prop 98 will abolish rent control; it tries to soft-pedal the issue a bit. Are am I missing the correct section?
5.21.2008 7:55pm
Adam J:
Orin, you should look at the text of the proposition itself too, the rent control section appears to be hidden in the section entitled Effective Date.
5.21.2008 8:10pm
Mike& (mail):
I'll be voting "No" for 98. "Government may not set the price at which property owners sell or lease their property." That's quite the lawyerly phrase.
5.21.2008 8:20pm
Mike& (mail):
Holy cow, Adam J. Good catch. The way Prof. Somin has spun this will certainly cause me to read his future posts with much more skepticism.

Yeah, I guess if you read really, really, really carefully, you'll see that "the official Prop 98 website specifically notes that it will" phase out rent control. Sure, that's technically right. But, man, you really do need to squint.

This post is probably a good example why more voters should not be "rationally ignorant." If I had taken Somin's word for it, I wouldn't have thought anything especially underhanded was going on with Prop. 98's rent control provision. Boy, would I have been wrong.

Thankfully, I now know to be even more skeptical of what he writes.
5.21.2008 8:25pm
Mike& (mail):
The rent control phase out is "specifically" mentioned in the text of the Proposition. Right where you'd expect it to be:

SECTION 6. EFFECTIVE DATE
The provisions of this Act shall become effective on the day following the election ("effective date"); except that any statute, charter provision, ordinance, or regulation by a public agency enacted prior to January 1, 2007, that limits the price a rental property owner may charge a tenant to occupy a residential rental unit ("unit") or mobile home space ("space") may remain in effect as to such unit or space after the effective date for so long as, but only so long as, at least one of the tenants of such unit or space as of the effective date ("qualified tenant") continues to live in such unit or space as his or her principal place of residence. At such time as a unit or space no longer is used by any qualified tenant as his or her principal place of residence because, as to such unit or space, he or she has: (a) voluntarily vacated; (b) assigned, sublet, sold or transferred his or her tenancy rights either voluntarily or by court order; (c) abandoned; (d) died; or he or she has (e) been evicted pursuant to paragraph (2), (3), (4) or (5) of Section 1161 of the Code of Civil Procedure or Section 798.56 of the Civil Code as in effect on January 1, 2007; then, and in such event, the provisions of this Act shall be effective immediately as to such unit or space.

There is nothing sneaky about that, folks. Nope, nothing at all. In fact, looking into the effective date of legislation is where you always find substantive provisions of the law. Right?
5.21.2008 8:30pm
coloradan (mail):
Here's a shout-out to Colorado's single subject requirement for initiatives. This proposition wouldn't make it onto the ballot here.
5.21.2008 9:13pm
Nathan_M (mail):
Adam J and Mike&, the definitions of "Taken" and "Private Use" in section 3 of the initiative are designed to include rent control, so I don't think it's accurate to say the rent control measures are hidden in section 6.

That said, I can see why a layperson reading the initiative would not realize that, and I think the drafters probably intended to mislead people. I personally think rent control is bad policy, but that doesn't justify a misleading proposition.
5.21.2008 9:20pm
David M. Nieporent (www):
Of course, the rent control section is not hidden in the effective date provision; what's you're quoting from the effective date provision is the grandfathering of rent control. Rent control is abolished in Section 3, (b)(1), where it defines a taking, and (b)(3)(iii) where it defines private use.

And Section 1(c) explicitly mentions rent control as one of the issues that Prop 98 is concerned about.
5.21.2008 9:21pm
Dan2 (mail):
coloradan, I understand that in many people's minds they are separate issues. However, for many they are the exact same issue: If you own an asset, the gov't may take it in whole or in part. Giving it to another developer is taking it in whole. Forcing you to only rent it at a certain price is taking it in part--but it's still taking something you own.
5.21.2008 9:23pm
David M. Nieporent (www):
Here's a shout-out to Colorado's single subject requirement for initiatives. This proposition wouldn't make it onto the ballot here.
...if liberal judges who oppose the initiative vote based on their policy preference rather than the law.

Just because people decide to compartmentalize so they think that transferring a home to a private developer is awful but transferring an apartment to a private tenant is not, doesn't make these two separate things.
5.21.2008 9:23pm
Smokey:
Mike&, you can stop the hyperventilating now. There is nothing wrong with eliminating rent control. Nothing. As repeatedly explained, the Prop 98 website is upfront about it. Nothing is hidden.

The problem with rent control is that it always ends up harming the poorest renters. Somehow, I have the feeling that you're not one of them. You've certainly never mentioned that you're the least bit concerned about the bottom rung of society. Hey, you've got your own problems, right?

Protesting that the voters may decide to take your hands out of the pockets of the person who supplies your residence smacks of elitism -- the true mark of a liberal.

Tell the truth, now. You couldn't care less about any low income renters. You only care that you might have to finally begin paying market rents like most everyone else, instead of living at an innocent party's expense.
5.21.2008 9:25pm
coloradan (mail):
However, for many they are the exact same issue: If you own an asset, the gov't may take it in whole or in part.

Hmmm. Seems like you've just drawn a significant distinction between the two issues, indeed a distinction that has not gone unnoticed by the Supremes.

...if liberal judges who oppose the initiative vote based on their policy preference rather than the law.

OK, then draft a title for Proposition 98 that satisfies Colo. Rev. Stat. 1-140-106.5(a)(1). I suspect it's not as easy an exercise as you claim.
5.21.2008 9:44pm
Snarky:
I am against rent control.

I am also pro-Kelo.

An unusual combination? I don't think so. I am pro-development.
5.21.2008 10:03pm
Mary Katherine Day-Petrano (mail):
Here's the thing about California -- California has made some decent efforts at requiring affordable housing to be built, although not enough. Any poor or disabled person's odd of finding housing would fare much better in California that Florida, for example, where there are regular roving police sweeps of homeless poor and disabled people to simply lock them all up in the jails and prisons.

California is taking a very compartmentalized view of it's obligations to provide affordable housing to the poor disabled under Kelo and rent control. Given that the State has a mandatory obligation to fully fund Title II of the Americans With Disabilities Act (it IS an economic Act) in light of Sec. 1503(1) &(2) of the Unfunded Mandates Reform Act of 1995 to provide the State's poor disabled safe affordable housing, California is under an obligation to invoke its rent control laws and Kelo as part of its Title II ADA enforcement mechanism and full funding requirements.

In other words, use Kelo to eminent domain property upon which to construct safe affordable rent controlled housing for the State's poor disabled.

All this other nonsense analysis that goes on and on and on in this thread and the linked related threads is simply irrelevant to those mandatory anti-discrimination obligations placed on the State.
5.21.2008 10:11pm
glangston (mail):
This seems similar to the tactics of anti-gunners who want to divide the hunters from those who believe the 2nd is NOT about hunting.

It was a political calculation but not yet a mistake. There is no sure thing in this initiative process. How often have people believed a proposition was a slam dunk that failed or at least failed in the long run. Even a winner, like the marriage inititiative was a loser in the long run.

I wonder if, without the support of apartment owners, this initiative would have made it this far.

It's not the end of it anyway. This forced the hand of government which showed itself to be at best, disingenuous and status quo.
5.21.2008 10:19pm
Mary Katherine Day-Petrano (mail):
Not only is California aiming at enacting Props that will be subject to a a Title II ADA injunctive suit from the gitgo, but when is Molski or SOME OTHER DISABLED AMERICAN going to entertain the rest of the Country by filing a Title II ADA injunctive suit against Prop 13 for conflicting with the ADA subjecting that State law to federal preemption? Am I going to have to move back to California and do this myself? Florida is following everything California does in the housing and property tax arena -- all for the worst. It all has a disparate impact on poor disabled Americans.
5.21.2008 10:21pm
eswierk (mail):
So this guy I know receives a postcard entitled "Voter Information Guide" in the mail today, urging him to vote No on 98 and Yes on 99. Being a lazy voter, he of course hasn't read more than the pro and con arguments for either proposition, each accusing the other of being pushed by corrupt rich people. So he's ready to vote no on both.

As he's walking over to the trash can to toss the postcard he notices it says that 99 is endorsed by the League of Women Voters of California.

He thinks, "Huh, League of Women Voters doesn't sound like one of them special interest groups. If they like Prop 99, it can't be all bad."

What's a lazy voter to do?
5.21.2008 10:52pm
Dave Hardy (mail) (www):
1. AZ at least has a requirement that an intiative relate to one subject only. (It has a similar requirement as to statutes, which courts refuse to enforce).

2. It's not an uncommon tactic here for opponents of an initiative to introduce a rival one that does not go as far, or otherwise undermines the initial proposal, and then claim that their idea is superior.
5.21.2008 11:16pm
Mike& (mail):
Mike&, you can stop the hyperventilating now. There is nothing wrong with eliminating rent control. Nothing. As repeatedly explained, the Prop 98 website is upfront about it. Nothing is hidden.


Huh? Where did I say I supported rent control? I don't, but that has nothing to do with the issue under discussion.

If you think hiding provisions in the effective date along with putting descriptions of provisions in legalese is "upfront," then I guess we'll have to agree to disagree.
5.22.2008 12:32am
David M. Nieporent (www):
What's a lazy voter to do?
'Round these parts we call them "Rationally ignorant," not 'lazy."
5.22.2008 4:23am
Public_Defender (mail):

That imperative is particularly important when the other side has vastly greater resources and media support.


The "property rights" side has the support of hugely influential and wealthy corporations and organizations. Kelo was an aberration. As Professor Kerr pointed out in a comment to a previous post, only about 40-50 California property owners a year face Kelo-style actions.

Usually, "property rights" is the battle cry of large corporations and developers who want to pollute the environment with impunity or put noxious businesses right next to residential neighborhoods.

The "property rights" movement is generally anti-populist because it attempts to allow people with the means to buy power more control than people who elect power.
5.22.2008 8:08am
Public_Defender (mail):
The provision of Prop98 that requires compensation for "damage" to property rights looks like an attack on environmental regulation. Prohibiting a mining operation or a factory farm from discharging toxic waste into the watershed would at least arguably "damage" the property rights of the owners.

Prop98 also expressly prohibits the use of eminent domain for utilities. It's just as hard to build or expand an electrical grid or water supply without eminent domain as it is to build roads.

Prop99 solves the Kelo problem--taking owner-occupied homes. Property rights advocates used the fact that Pfizer (indirectly) was taking Kelo's private home. Now that a state is addressing that issue, we hear, "Hey, that's not what we meant. We also meant to protect absentee landlords and a lot of others."

I don't think Professor Somin is dishonest. He openly supports all of the anti-democratic parts of Prop99. I remember the post when he wondered why politicians didn't run on the platform that libertarian policies would lower the property values of homeowners. He's a purist and an honest purist.

Professor Somin's honesty aside, Prop 99 solves the Kelo problem. Prop98 is trying to sneak in protections for big business and other developers. There is a lot more than rent control hidden in Prop98.
5.22.2008 10:15am
Adam J:
Thanks David for explaining it, I was lazy and skimmed thru the definition section. It's still seems sketchy to me that instead of having an overt rent control abolition clause in Sec 3(A) they use definitions to shape the emininent domain clause to include rent control abolition. And the section 1(c) states this finding in the second sentence of the section... and the first section is the completely unrelated issue of kelo takings. At the very least, the proposition should have clearly stated in section two that one purpose of the proposition was to eliminate rent control.
5.22.2008 10:48am
Smokey:
I note that a couple of posters above don't seem to have any problem with the adverse effect on low income tenants that Prop. 99 and the Kelo decision will cause.

Protecting single-family homeowners is fine -- as far as it goes. But what about tenants? Under both Prop 99 and Kelo, low income tenants can be arbitrarily evicted by collusion between developers, local governments, and construction unions.

Kelo was only recently decided, and its effect will continue to ratchet up. The problem will escalate in the future, when a local government sees another local government doing something that puts more spendable property tax money into its coffers. The decision to evict low income tenants will become easier and easier, until it is routine. The problem will ramp up. Anyone who doubts this certainly doesn't understand human nature or politics.

As repeatedly explained above, rent control is a taking. A more insidious taking than usual, in that the government arbitrarily designates certain property owners as the ones who are legally forced to subsidize each and every tenant -- no matter how well off those tenants may be. New York City is rife with stories of very wealthy tenants scheming and conniving to pass on their rent stabilized [rent controlled] apartments to family members and others; some apartments renting for under $300 a month are next to identical apartments in the same building that rent for over $3,000 a month.

The best answer for poor tenants is the Section 8 program, where renters receive financial assistance based on their income, or lack thereof. But the Section 8 program was gutted in order to funnel the monies into the pockets of favored special interests. Poor tenants have no special interests to protect them. So they are 'fair game' to those who need to evict them, for the money those evictions will bring.
5.22.2008 2:03pm
Mary Katherine Day-Petrano (mail):
"So this guy I know receives a postcard entitled "Voter Information Guide" in the mail today, urging him to vote No on 98 and Yes on 99. Being a lazy voter, he of course hasn't read more than the pro and con arguments for either proposition, each accusing the other of being pushed by corrupt rich people. So he's ready to vote no on both." ...

The problem is ...

he is blind! And the postcard is in print PAPER without braille!!
5.22.2008 5:27pm
Dilan Esper (mail) (www):
Government may not set the price at which property owners sell or lease their property. However, tenants who live in rent-regulated communities will continue to receive the benefit of those regulations as long as they live in their residences.

As I read this, the last paragraph is the one about rent control. But it doesn't say that Prop 98 will abolish rent control; it tries to soft-pedal the issue a bit. Are am I missing the correct section?

You are right, Professor Kerr, and that isn't much different from what Proposition 209 (the initiative that banned racial preferences) sponsors did on the issue of outreach programs:

See this thread:

http://volokh.com/posts/1189961151.shtml
5.22.2008 10:12pm
Dilan Esper (mail) (www):
Just because people decide to compartmentalize so they think that transferring a home to a private developer is awful but transferring an apartment to a private tenant is not, doesn't make these two separate things.

The thing that you miss about single subject requirements is that they don't prevent the public from doing the two things. They just require two votes, to ensure that the public isn't being tricked or forced into supporting something they oppose because it is bundled and downplayed.
5.22.2008 10:15pm