PD Editorial: Keep a close eye on state’s new rent control law
One might have thought that after California voters soundly rejected last year's rent control proposition the issue was settled. Think again. Never underestimate the willingness of lawmakers who think they know better to overrule the people. Statewide rent control is coming, and it's a poor solution to the state's serious housing affordability problems.
The new law will cap rent increases at 5% plus inflation annually on apartment units that are more than 15 years old. It also requires landlords to have “just cause” before evicting a tenant who has been in the unit for more than a year.
Democratic lawmakers passed the bill, AB 1482, in the final days of the session. Gov. Gavin Newsom has said he will sign it. Sonoma County's delegation - state Sens. Mike McGuire and Bill Dodd and Assembly members Jim Wood, Marc Levine and Cecilia Aguiar-Curry - all voted for the bill.
Those hoping that rent control will solve the problem of high housing costs are in for some disappointment. This sort of government meddling in the marketplace upends the rules of supply and demand. Indeed, one need only look at the handful of California cities that have local rent control for proof. Los Angeles, San Francisco and San Jose aren't exactly cheap places to live despite capping rent increases locally.
The likely outcome of the statewide cap will be less incentive for developers to build new housing because their long-term potential for profit is limited, fewer landlords willing to invest in major renovations because they may not be able to recoup their costs and tenants staying put in rent-controlled units lest they have to pay market rate in a new place.
That last problem is particularly pernicious. If people don't move out of entry-level units, then nothing opens up for new people on the market looking for housing. The winners will be the people who luck into a rent-controlled apartment now.
The better solution would have been measures to increase the supply of housing, especially affordable housing. Scarcity allows landlords to charge more.
Scarcity is, in part, the product of local resistance to density and affordable housing. Too many communities have zoning that favors single- family housing. They distort the marketplace from the other direction, limiting supply to inflate property values.
There are plenty of ways that the state could mandate or encourage easing off on the single-family-home paradigm. Santa Rosa, for example, is offering incentives for building multi-family housing in the vicinity of SMART rail stations.
At least the rent control law will sunset in 10 years. In theory that will force the state to evaluate how well it has performed before renewing it.
Not that it should take a decade to figure out if it works. The state Department of Housing and Community Development or some other suitable state agency should closely monitor the effects of statewide rent control from the get-go. If it only adds to the problems, that agency should quickly propose fixes or even repeal to the Legislature.
Lawmakers might have satisfied advocates by capping rent increases, but the people who really need an affordable place to live will have to wait for measures that increase the housing supply.
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