Rents in California, especially the Bay Area, are soaring. Decent housing is unaffordable for far too many.
But the solution is to build more housing, not restrict rents. That’s why voters should reject Proposition 10 on the Nov. 6 ballot.
The initiative would lift state limitations on local rent control laws, allowing cities to impose restrictions on more housing. That’s the last thing we need. It would only make the situation worse.
Rent control is a feel-good idea. A quick fix to a complicated problem. But it is not very effective at protecting poor or vulnerable tenants. And, more significantly, rent control discourages new rental home construction, the very thing we need to ease the state’s housing crisis.
Most economists agree that rent control reduces the quality and quantity of housing. “The analysis of rent control is among the best-understood issues in all of economics and — among economists, anyway — one of the least controversial,” liberal economist and New York Times columnist Paul Krugman wrote in 2000. It’s just as true today.
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It’s politically easy to demonize developers. But that won’t make them build more housing – and they certainly won’t if we cap future rents and, in turn, devalue the units they’re considering building.
The solution is not to impose price controls, which is exactly what rent control is. The solution is to encourage development so that supply can meet demand.
“Rent is high in California because the state does not have enough housing for everyone who wants to live here,” the state’s Legislative Analyst’s Office wrote when reviewing Prop. 10. “People who want to live here must compete for housing, which increases rents.”
The problem is only getting worse: From 2007 to 2017, only 24.7 housing permits were filed for every 100 new residents in California — much lower than the U.S. average of 43.1 permits, according to Next 10, a non-partisan group that studies the state’s future. To increase supply, we must streamline the application process and control permitting costs to incentivize new construction. Instead, Proposition 10 would chase away developers.
To understand how the measure would work, first consider the current limits on rent control in California. Currently, at least 17 cities, including 10 in the Bay Area, have some form of rent control.
But California has a two-tier system. Under the state’s Costa-Hawkins Rental Housing Act, local governments can only apply rent controls to multi-unit apartment buildings constructed before Feb. 1, 1995. And they must allow landlords of those older buildings to reset rents to market rates for new tenants.
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Prop. 10 would do away with those restrictions. Cities would have free rein to expand price controls to all types of units, including those built before 1995, and to limit how much landlords could increase rents for new tenants.
“Neither of these changes would increase the supply of housing and, in fact, likely would discourage new construction,” the state Legislative Analyst’s Office wrote in 2016, when the ballot initiative was being contemplated.
In other words, it would not fix the state’s housing crisis; it would exacerbate it.
Source: FS – All – Real Estate News 1
Editorial: Prop. 10 would exacerbate California’s housing crisis