EDITORIAL: Rent Control is no solution to our housing crisis — Long Beach Press Telegram, June 1, 2018
The crisis caused by the rising cost of housing in California has a solution: Build more housing.
People can debate where or what type of housing should be built, but there can be no doubt that more housing is needed. That’s why it’s so troubling that a measure headed for the November ballot would cause less housing to be built.
Proponents of the Affordable Housing Act seek to repeal the 1995 Costa-Hawkins Rental Housing Act, which put statewide limits on local governments’ power to enact rent-control ordinances. Costa-Hawkins prohibited rent control on newly constructed residential housing, and it guaranteed the owners of older buildings under rent control the right to raise rents to market rate for new tenants when former tenants moved out voluntarily.
The proposed initiative would repeal Costa-Hawkins, giving local governments the power to impose rent control on any housing stock, old or new, multi-family or single-family, even a converted garage apartment. The measure needs 365,880 valid signatures to qualify for the November 2018 ballot. Proponents have already submitted over 565,000 signatures.
In 1981, the city of Los Angeles paid the RAND Corporation to study the impact of its then two-year-old rent control ordinance on the housing market. The report warned that in the long run, rent control “may create the very housing shortage it was designed to alleviate.”
The RAND researchers documented in the 1981 study and in a second study in 1988 that building owners cut back on expenses, like maintenance, and sometimes removed the rental units from the market by converting the apartments to condos or demolishing the buildings.
Rental housing is a business, and it’s an investment. When the expenses go up and the rental income doesn’t, it’s a losing investment.
Absurdly, the California Supreme Court ruled in a 1984 case that the owners of rental housing did not have the right to get out of that business, no matter how much money they were losing. In Nash v. City of Santa Monica, the court said a property owner’s financial problems were outweighed in importance by the city’s interest in protecting scarce housing.
The result was the 1986 Ellis Act, a state law that says a government may not “compel the owners of any residential real property to offer, or continue to offer, accommodations in the property for rent or lease.”
People who don’t like Costa-Hawkins don’t care much for the Ellis Act, either. At least one candidate for governor, Delaine Eastin, has called for the Ellis Act to be repealed.
But unless a vast proportion of the state’s population is going to be housed in Soviet-style government-owned apartments, the private-sector business of rental housing must be treated like any other business that offers goods or services to willing buyers. It cannot be subjected to price controls without the inevitable consequence of worsening shortages.
If the initiative repealing Costa-Hawkins were to pass in November, the battle over rent control would shift to city governments, and activists are already gearing up for the fight. In Pasadena, proponents of a rent control ordinance fell just 2,112 signatures short of the 12,336 that would have put the measure on the city’s November ballot.
The prospect that a city may enact rent control in the future is enough to chill investment in rental property and could blow up countless pending deals for new construction. Trying to fix a housing crisis with rent control is like sending an oil tanker to put out a forest fire.
By The Editorial Board