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THE VIEW FROM HERE - Angelenos live in a kleptocracy, which means “governed by thieves.” Wikipedia has a longer definition:
“Kleptocracy, also referred to as thievocracy, is a government whose corrupt leaders use political power to expropriate the wealth of the people and land they govern, . . ..”
While the ingenuity of thieves is vast and multifaceted, Prop 33 gives Angelenos the chance to kick the crooks out of a large segment of our lives. It abolishes a 1995 law which billionaire landlords passed which prohibited the people from making any law affecting the price of any dwelling units constructed after 1978 - (1978 was for Los Angeles, other cities had other dates.)
Here is the actual language
“Repeals Costa-Hawkins Rental Housing Act of 1995, which currently prohibits local ordinances limiting initial residential rental rates for new tenants or rent increases for existing tenants in certain residential properties.”
Yep, Costa-Hawkins stopped citizens from passing laws affecting the rental units. The opponents call Prop 33 “rent control.” Prop 33 does not impose any single control on any piece of property in the state of California.
Prop 33 is The Essence of Democracy
Voters in each town, city, and county can meet together in public forums where the people as a community can decided what laws should govern their particular jurisdiction. That is the essence of a democracy -- people deciding the laws which govern their society. Kleptocracy lets the 1% pass rules which allow them to financially rape everyone else. As long as Costa-Hawkins Rental Housing Act of 1995 is the law, democracy is excluded from the housing market. Instead, the kleptocrats are free to do what they wish – which is always to drive prices higher and higher through a variety of frauds and other corrupt practices.
The Kleptocrats Lie About the Law of Supply and Demand
Supply and Demand does not set the rents in California. That should be obvious from the fact that “Los Angeles County lost 56,420 residents in 2023, the most of any county across the U.S.,” but housing prices kept rising. LA Times. People, who leave LA, vacate their homes. Thus, supply increases while demand is decreasing. We know that the exodus is not by homeless people since their numbers increase each year. Rising rents in face of a drop of demand indicates fraud.
People Need to Understand The Actual Law of Supply and Demand
Most omit the crucial word, “willing.” The Law of Supply and Demand determines the fair market price by “what a WILLING buyer will pay and for what a WILLING seller will sell.” Unless the renter knows all the facts, he is not a willing buyer. That is the essence of CarFax commercials where a man asked his high school coach which car he should buy. The coach says, “This one for sure,” and then Carfax shows that the car is overpriced by $4,600.00. It has been in an accident – a fact which the seller concealed.
The number of real estate frauds by landlords, mortgage lenders, real estate brokers is nearly limitless. For example, the biggest corporate landlords are being sued by the Feds for price fixing (Notice that the city attorney nor the District attorney did anything about the price fixing.) Potential renters find the same prices because the landlords subscribe to a computer AI-type service which sets the rental rates for everyone. Otherwise, each owner would set his rents without coordinating with tens of thousands of other landlords.
Since the Crash of 2008, another scam is that when banks foreclose, they do not turn put the house back on the market. Instead, they agree to keep houses off the market which artificially limits the supply. That drives up the price of houses and then the banks use higher sales prices of other housing to set high rents. The willing buyer does not realize that the supply of homes is much larger than he had been led to believe. This type of behavior was made an anti-trust violation are around 1900.
Another fraud is Spot Zoning where a developer pays a corrupt councilmember to approve a project which violates zoning, usually by allowing excessive density. Since the single-family home which the developer wants to buy will become income property, often with multiple units, the developer pays above the market value. His purchase price then goes into the Comps, i.e., the sales prices for that area. The next owner who wants to sell lists his house new higher Comp value. The family who wants to live in the home and not turn their property into a business venture, has to pay the excessively high developer value. The family is not a willing buyer since it does not know that the listing price was set by spot zoning, based upon bribing a councilmember.
Eventually, these and other frauds drive the cost of houses so high that Millennials and now Gen Zers move away. First, they went to the Inland Empire and then to Texas, Florida and Colorado. People fail to realize that the Costa Hawkins Act allowed so much corruption in the housing market that even the prices of single family homes were grossly inflated.
The City Tells Giant Lies
Lie #1 There is a Housing Shortage:
Reality: LA has a housing surplus. We have enough vacant housing to house very homeless person 3 times over.
Lie # 2: Density lowers housing costs.
Reality: Density increases land value. If a developer can build a 50-unit poverty project rather than a detached home, he will pay more for that parcel.
People think that because there are more apartments, the cost of each must be less than a house. Apartment houses, however, have lots of common areas which an R-1 home does not have. Building codes are stricter for multistory buildings which raise costs. Then, here is simply fraud, so that an apartment costs more to construct than the average single-family home. Developers are demanding close to $1 Million, while the cost of the average home is $950,000. An apartment should not cost as much as a detached house. For one thing, they have no yards and a lot less privacy.
Because Wall Street did not like it when developers would go bankrupt and no replace their loans, they developed a new scam. Wall Street loans the money to the city and the city loans it to the developer of Affordable Housing. When the developer goes BK and he keeps all the city’s money, Wall Street does not lose any money since the city has to repay the loan plus interest to Wall Street. Developer gives money to politicos and politicos give public money to developers and the public pays the bill with higher taxes.
How Developers Use The Costa-Hawkins Act
Since the Act allows older apartments to have rent control, they are not as profitable as new units. Thus, developers have been buying tens of thousands of old rent-controlled apartments, destroying them, and then constructing new units which are not covered by rent control. Under Garcettism, his ploy caused the Homeless Crisis because the destruction of so many older cheaper units was so fast, so many people on the streets so fast that the normal services like Midnight Mission could not handle all the newly homeless.
As the homeless population became a serious problem, it cost the city billions of dollars a year. Who pays this bill? Answer: The taxpayers and not the developers who caused the nightmare. Last year the City of LA budgeted $1.3Billion for homeless services and that does not include the extra costs for paramedics, firemen and police. Nor, does it include the billions which the County spends.
If there had been no Costa Hawkins Act and LA had had rent control on new construction, the developers would not have destroyed tens of thousands of older units just to build new units. Why? Their new units would have been subject to rent control. If a developer wanted to construct a project, he would have been forced to construct something that people wanted and not what he could make the highest project by victimizing poor people.
Prop 33 Ends Kleptocracy in Housing
When Prop 33 passes, the voters of each town, city, and county will have a chance to have the laws based on what the voters democratically chose and not by what Kleptocrats impose on us.
(Richard Lee Abrams has been an attorney, a Realtor and community relations consultant as well as a CityWatch contributor. You may email him at [email protected])
