Gullixson: Economist says rent control is a ‘terrible idea'

Santa Rosa's rental market has gone haywire. There's no question about it. But is this community ready for rent control? Moreover, does it need it, or does it just cause more problems?

Even as a slim majority on the Santa Rosa City Council appears ready to adopt some kind of rent stabilization measure, the community remains divided. This was evident during two recent community gatherings, each with some 400 people in attendance.

One was the annual economic outlook breakfast on Oct. 30 at the Hyatt Vineyard Creek Hotel in Santa Rosa featuring economist Chris Thornberg. After giving a particularly rosy economic forecast for the region, Thornberg was asked about rent control.

'We actually did a little study on this,' said Thornberg, founding partner of Los Angeles- based Beacon Economics. 'We asked the question, 'does rent control help low-income families?' And the answer is unequivocally no.'

It was not surprising that the comment drew applause from the crowd of mostly business people gathered for the county Economic Development Board event.

Part of the problem of rent control is that, under state law, the city can only place rent limits on multi-family units built prior to 1995. According to city officials, this means a rent control ordinance would only cover about 20 percent, or 13,386, of Santa Rosa's housing units.

Having such lopsided regulations has an impact, particularly on middle-income wage earners, Thornberg said.

'When you have rent control in the older stock, what you end up doing is keeping middle- income families, who should be moving up to the newer (housing units), you keep them in the older stuff,' he said. 'And that reduces the supply of potential housing for low-income families.'

In fact, those individuals get pushed out of the middle of the market place, he said.

'So, yeah, if you are kind of an aging hippie, it's great to have rent control because you get a nice subsidized apartment,' he said. 'But for that truly low-income family with a couple of kids, they don't up to have the opportunity to have a house at all. So it's a terrible idea.'

This stood in sharp contrast to the messages at a similar-sized gathering that occurred just five days earlier at the Glaser Center. The political rally was organized, in part, to draw support for local measures, including rent control, to help residents being priced out of the market.

'Families are facing crises,' said Omar Medina, president of the North Bay Organizing Project, which hosted the event. 'Rents are out of control.'

As Staff Writer Angela Hart reported, some of those at the rally even re-enacted a recent Santa Rosa City Council vote to spend $75,000 to study three possible options. One involved a rent stabilization ordinance. A second concerned adopting just-cause eviction rules, while the third involves creating a mediation process to resolve tenant-landlord disputes over rent increases.

Given the dramatic changes that have been occurring in the local rental market — with rents having climbed roughly 30 percent in the past three years — it's clear the City Council is prepared to do something. But, as Thornberg observed, there are good reasons for why only 12 cities in the state have enacted rent control for housing other than mobile home parks. Thornberg went on to discuss another hot issue in the local political front — raising the minimum wage.

Locally, the county Board of Supervisors has been considering adoption of a living wage ordinance and came close in August to creating a $15 minimum wage for roughly 1,100 county contractors and nonprofit employees. But the proposal was pulled at the last minute after mounting pressure from labor groups and living-wage advocates that the ordinance didn't go far enough.

Advocates are now pushing for a $15 minimum wage for about 5,500 county-affiliated workers, including in-home caregivers as well as nonprofit employees and for-profit contractors.

But Thornberg is clearly not a fan of such artificial means for raising wages. If government wants to help low-income families, he said it should resort to programs such as the earned income tax credit and free or subsidized child care, which have a proven track record for success.

'But here's the problem with those, they cost money,' he said. A revenue source needs to be found either by raising taxes or cutting back on spending somewhere.

'A minimum wage (increase) is a lazy way of doing it because the tax is built in,' he said. 'That makes you pay for it, Mr. Business, so I don't have to.'

But here again, pressure is mounting on the Board of Supervisors to do something, particularly at a time of pesky wage stagnation. (See 'Where have our pay raises gone' on the front of today's Forum section.)

Meanwhile, the number of people in Sonoma County living in poverty continues to grow even as the recession fades.

Staff Writer Martin Espinoza offered this jarring fact in a story last month that didn't get enough attention.

In 2007, there were 2,503 local families enrolled in California's food stamps program known as CalFresh. Last year, there were still 12,418 local families participating in the program. That means nearly 10,000 more families are on food stamps now than before the recession started. What recovery?

Meanwhile, Census Bureau figures show that the number of county residents living in poverty increased 23 percent between 2007 and 2014. That means one in nine people in Sonoma County lives at or below the federal poverty level. For a family of four, that means they get by on less than $24,000 a year.

OK, maybe rent control and minimum wage increases aren't the answer. But whether you're a property owner or an aging hippie, the question still needs to be asked: What the hell is?

Paul Gullixson is editorial director of The Press Democrat. Email him at paul.gullixson@pressdemocrat.com.