The Mirage of Rent Control
RENT CONTROL (N) - regulation by law of the rent a landlord can charge for domestic accommodation and of his right to evict tenants.
I
n California, only 32 percent of families can afford a median-priced home.
In Santa Clara, Santa Barbara, and San Francisco, prices have increased to the
point that fewer than 20 percent of buyers seeking to purchase a home as their
residence can afford to do so. It’s fair to say that California is the most challenging
place in America to buy or rent a home.
Soaring home prices have increased demand for rental housing, but
California’s rental housing market is also experiencing
a severe lack of supply. California currently has a 30-
year low rental vacancy rate of 3.6 percent, and, as a result,
California’s average rent is approximately 50 percent higher than
the rest of the country. The lowest income renters across the state
are spending approximately 68 percent of their income on rent.
For context, renters paying more than 30 percent of their income
on housing are considered to be “cost-burdened.” The over-
arching problem is rooted in the simple economics of supply and
demand. California does not have an adequate supply of hous-
ing, which drives home prices and rents beyond people’s reach.
Rent Control Is a Mirage
The housing supply crisis has fueled calls for stronger protections, including rent
control policies, for low-income renters. The problem is that research consistently
demonstrates that mandating artifi cial prices for rental units reduces the supply of
rental properties and creates an economic disadvantage for low-income families
most in need of an affordable home. These are among the reasons why rent control
has been outlawed in 27 states across America. Despite the risks, more than a dozen
California cities currently have rent control policies in place. However, the policy
has not had a positive impact on housing affordability.
While these policies may provide some relief for a small number of renters,
research has demonstrated that rent control has a longer-term impact on the quality
of life for families in four key ways:
•
•
•
•
Top Producing Team
Gilroy Offi ce, 2015, 2016, 2017
Sean Dinsmore, Realtor
Intero Real Estate Services
www.TheDinsmoreTeam.com
408.710.2855
DRE #01966405
Marta Maloney, Realtor GRI
Intero Real Estate Services
www.TheDinsmoreTeam.com
408.710.0571
DRE #01352339
Reduces existing and future supply of rental housing.
Hurts low-income households.
Deteriorates quality of rental housing.
Increases costs for all renters.
When they can’t earn a fair market price, investors have a greater incentive to
put their money in other types of property, which reduces the supply of rental
properties. Investors who already own rental property are also likely to respond
by converting buildings from residential to nonresidential use to earn fair market
value, which takes more rental property out of stock.
Supply is also impacted due to low turnover. Rent controlled units are attractive
to tenants, so, once they get into a controlled property, they are less likely to move
regardless of whether they can afford to rent or buy a market-rate property. This lowers
turnover and limits the supply of affordable rental housing for those most in need.
Discrimination Against Low-Income Families
The negative effects of rent control are felt disproportionately by low-income
people. First, not all rent-controlled units are preserved for low-income tenants
or “means tested.” Second, in an impacted market, the Legislative Analyst’s Offi ce
points out that landlords are likely to exert more discretion regarding whom they
rent to, and factors including income and credit history can become even greater
decision factors which can further bias the selection process against low-income
families.
Continued on page 23
GILROY • MORGAN HILL • SAN MARTIN
december 2018-january 2019
gmhtoday.com
9