Californians: Resist the Rent-Control Temptation

Californians: Resist the Rent-Control Temptation

2018-09-04T08:29:38+00:00September 4th, 2018|Advocacy, Local Updates, National Updates|

“It’s not hard to understand why 450,000 Californians would sign the initiative to repeal limits on rent control in the state. Of the top 10 most expensive major city rental markets in the United States, four — San Francisco, San Jose, Los Angeles and Oakland — are in California.

The effects are well-known and serious. Those who would move from parts of the country with high unemployment to Silicon Valley, for instance, find they cannot afford to do so, leading some economists to link California’s housing costs to increased income inequality. And the ranks of Californians burdened by housing costs — an official census calculation, based on paying more than a third of household income in rent — reaches beyond those of low income well into the middle class.

But as tempting as it is simply to use price regulation to clamp down on housing costs, it’s a temptation voters should resist.

In the run-up to the Nov. 6 election, voters will hear what have already become familiar arguments: The surest route to lower housing costs is increased housing supply. Private owners should not be asked to provide what amounts to a subsidy. For those unconvinced, however, it’s worth looking at rent control through another lens — how it actually works.

Perhaps the best city to which to turn for such guidance is New York, where rent-regulated housing constitutes fully a third of the city’s 3 million-plus housing units, including 63 percent of all rental units. What happens in New York leads to more general conclusions about the flaws of rent regulation, including:

There is no guarantee that those of low income will benefit. For instance, a study by New York University’s Furman Center for Real Estate and Urban Policy found that in the most desirable parts of Manhattan, the incomes of rent-controlled households were “higher than the median income of market-rate tenants” in most other New York neighborhoods. It’s not hard to see why. Higher-income households are more attractive than lower-income ones. Owners who can only charge a limited rent have a strong incentive to make sure that tenants pay what landlords are allowed to charge.

Many of the lower-income households being served are elderly, not the young families with children or new tech workers moving from Buffalo whom initiative-backers have in mind. In New York (again, according to NYU), just under a quarter of all rent-regulated tenants are retiree households whose income may be limited but whose assets are not necessarily low.

The elderly are not moving. The over-representation of the elderly leads to a broader and much more serious problem: exceptionally low turnover. Indeed, the Furman Center has found that “about 23 percent of households in rent-stabilized units have lived in their unit for 20 years or more, compared with only 7 percent of households in market-rate units.” It’s logical. Those who are lucky enough to hit what amounts to a housing lottery in New York tend to stay put — even when, in the case of many older tenants, they are “over-housed,” meaning they are empty-nesters with empty bedrooms. New York, in fact, despite its historic reputation for welcoming the ambitious, has the lowest housing turnover rate of the top 10 U.S. cities. That means newcomers must double or triple-up, as they face high rents on the non-regulated units that become available.”

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