EDITORIAL: Rent Control would worsen housing crisis — Orange County Register, April 18, 2018

A proposed state rent control bill might sound good to some, but would only exacerbate housing affordability in California for the vast majority of people.

Housing affordability is undeniably a serious problem in the Golden State, and many solutions have been offered to address it, including more than 130 housing-related bills in the Legislature. Among them is Assemblyman Richard Bloom’s Assembly Bill 1506, which would allow for new rent control restrictions by repealing the Costa-Hawkins Rental Housing Act of 1995, which exempts housing built after 1995 from rent control and prevents cities that adopted rent control prior to 1995 from expanding their ordinances.

The Santa Monica Democrat recently decided to shelve his bill for the time being, saying that the issue is presently too contentious, particularly given the opposition of influential real estate interests such as the California Apartment Association and the California Association of Realtors. He hopes to revive the bill next year, however. That would be a mistake.

Lower rents sound great if you’re a current renter, but price controls make it that much more difficult for future renters to find housing. Reducing the profit developers and landlords receive, compared to market rates, diminishes or eliminates the incentive to build additional housing developments in the first place. Moreover, since competition for rent-controlled units is so fierce, landlords have a much diminished incentive to maintain them well.

As Pepperdine University economics professor Gary Galles noted in a recent column for the Mises Institute, rent control is a classic example of a case where “bad economics makes good politics.” “One of the most universally accepted propositions among economists is that rent control produces a host of adverse social consequences with its large, involuntary redistribution of wealth and suppression of market prices as communicators of information and incentives,” he wrote.

Galles observes that while rent control is typically sold as a housing solution tailored especially to the poor, oftentimes they are not the ones who benefit from it. “[R]ent controlled areas, rather than helping those of low and moderate means, become increasingly populated by higher-income tenants with few children,” he asserts. The poor “populate rent control rhetoric but far less of the housing available under it.”

A much better solution, which would enhance property rights instead of infringe upon them, would be to eliminate the many government-created barriers that restrict housing supply and drive up prices. Even the Obama administration recognized this, as evidenced by the “Housing Development Toolkit” it published in September.

“The accumulation of state and local barriers to housing development — including zoning, other land-use regulations and unnecessarily lengthy development approval processes — has reduced the ability of many housing markets to respond to growing demand,” the White House asserted.

Merely by enhancing property rights, instead of infringing upon them, governments would allow the private sector to offer more housing options at lower prices, which would benefit all renters, not just those lucky enough to be locked into rent-controlled units if and when the bill is signed.


By Orange County Register Editorial Board