Rent control defying basic economics
Despite all the housing-related proposals in Sacramento, lawmakers have apparently yet to learn that more government involvement, making housing more expensive and less profitable, is never going to solve the state’s housing affordability problems.
Discussions of housing oftentimes tend to focus on single-family developments or other types of housing for purchase, and neglect rental properties, which is unfortunate, since rentals make up nearly half of the housing stock in California.
As housing prices and consumer debt, particularly student loan debt, have increased, and the housing crash of a decade ago still makes some wary of buying a home, renting has become a more attractive option for an increasing number of people — in California and nationwide.
Last year, nearly 37 percent of the nation’s housing units were rental properties — the highest rate in 52 years, according to a July report from the Pew Research Center based on U.S. Census Bureau data. And California relies on rentals more than most, with rental properties making up more than 46 percent of the state’s housing units.
So it is a shame that, just as with owned housing, lawmakers are failing to grasp the basic economics of the housing market, and embarking instead on policies that will only make rental housing less available and less affordable.
A chief example of this is the increasing calls for rent control, a movement which has experienced somewhat of a revival since its heyday during the late-1970s to mid-1980s, when 13 cities — including Los Angeles, San Francisco, San Jose, Berkeley and Oakland — adopted rent-control ordinances. It was fairly dormant, or at least unsuccessful, for a long time, but the Sacramento Bee reports that rent-control battles are heating up again, with voters in Richmond and Mountain View adopting rent-control measures in 2016 and similar campaigns being launched “up and down the state, from Sacramento to Pacifica to Glendale.”
But, just as with other kinds of government-mandated price ceilings, rent control creates shortages, as more people want housing at the artificially-low price than developers and property managers are willing to provide. A small number who are lucky enough to obtain below-market apartments will benefit, but many others will not, and they will be left with even less affordable options than would exist in the absence of rent control. In some cases, rent-controlled buildings are merely replaced with pricier — and more profitable — forms of housing.