San Diego experienced a slowdown in multifamily investment in 2018, posting the lowest volume since 2014, with $2 billion in transactions. Local investors noted that the weight of Proposition 10 played a role in their reticence. However, when polling shifted in the third quarter and showed a clear majority in favor of supporting Costa Hawkins, investment notably picked up in the fourth quarter. That momentum largely carried through the first quarter 2019.
Proposition 10 was a ballot initiative to expand local governments’ authority to enact rent control on residential property. It would have repealed the state law, Costa Hawkins, that restricts the scope of rent control policies that cities and other local jurisdictions could impose on residential property.
CoStar tracked 129 recorded transactions in the first quarter and $640 million in total volume. More than 2,600 units traded hands. Reported capitalization rates -- calculated as the ratio between the net operating income produced by an asset and the original capital cost -- held steady at 4.3%, quarter-over-quarter.