Matt Fleming: Rent control is the zombie that refuses to die

Like the zombie that refuses to die, rent control is back.

For the third time in four cycles, Californians will be forced to vote it down.

Why are we doing this, you ask? That’s a good question.

If it has lost by a narrow margin in an unfavorable turnout, it might make sense to run it again. But it lost by nearly 20 percentage points in both 2018 and 2020, and most election cycles in California are favorable for progressive policies.

So it’s unclear why decision makers at AIDS Healthcare Foundation – the organization behind the measure – think this time will be different; that’s a question for their donors.

The AIDS Healthcare Foundation spent around $60 million in 2018 and 2020 unsuccessfully trying to pass this thing and then another $8 million to get it on the ballot this time. There has to be better uses for $68 million than on losing efforts for bad, unpopular policy.

And make no mistake: Rent control is bad policy.

“Rent control.”

It sounds like good policy when you say it aloud, right?

“Rent control.”

See how good that feels?

Unfortunately, that’s as far as good vibes can carry it. It’s the poster child for counterproductive policy. It makes housing less affordable, drives gentrification, and makes life impossible for many landlords.

This guy is defending landlords???

Easy. Landlords have feelings too, but their feelings take a backseat to the fact that rent control makes housing less affordable and invalidates the entire argument for it.

Let’s look at the record: cities like San Francisco, Los Angeles and New York all have rent control and none of them are affordable.

Rent control has been around since the 60’s in New York and the 70’s in San Francisco and Los Angeles. If it was ever going to work, it would have worked in one of these cities by now. But all three cities have become less affordable, especially recently.

What do these cities have in common besides high housing costs? Low housing supply.

In California, regulations have in one way or another conspired to block development. The state is so far behind, which is what happens when demand greatly exceeds supply for a really long time.

Since this policy is not really working in the cities that have it, it makes no sense to expand on it throughout California. It makes even less sense when you consider California as a whole already has some form of rent control, or at least a system that allows for it.

In short, this ballot measure would repeal the current system, passed decades ago, and strip away at least two very important protections.

First, homeowners and condominium owners are protected from rent control. This would end. Second, landlords subject to rent control now are at least allowed to raise rent to reset to market rate after someone moves out. This would end too.

Here’s a logical reason why we should care about landlords’ feelings: costs increase over time and landlords use rent as income to pay those costs. But when costs rise and income can’t, landlords fall into trouble. The American Enterprise Institute recently cited Census Bureau data from New York showing that compared to unregulated units rent-controlled units had two to three times as many maintenance and rodent problems.

Rent control won’t necessarily help lower-income residents. That same Census data found that 22 percent of tenants occupying rent control units made at least $100,000 annually.

Instead, what ends up happening is that after a while, building owners – especially owners of smaller, more affordable buildings – sell. And what replaces those buildings is usually either condos or higher-end units, causing neighborhoods to gentrify.

In San Francisco, Stanford researchers found that rent control actually reduced rental housing supply by 15 percent, causing a citywide increase in rent by 5.1 percent. On top of that, rent control in the city made tenants 20 percent more likely to stay in their units instead of eventually moving on (meaning fewer rental options, or a bottleneck in the market),

Add that all up and what do you get?

“Indeed, the combination of more gentrification and helping rent controlled tenants remain in San Francisco has led to a higher level of income inequality in the city overall,” the Stanford researchers wrote.

Ok, so just to recap: Rent control decreases rental supply, leads to overall rental increases, makes life very hard for landlords (especially people renting out their family homes), causes gentrification, increases income inequality and doesn’t lower the rent.

Again, why the AIDS Healthcare Foundation is spending more than $68 million to push this idea is a question its donors should ask.

A better policy for it to pursue would be reforming the California Environmental Quality Act. It’s seen as one of the biggest impediments to housing development in the state, which is why Gov. Gavin Newsom just went through great lengths to reform it in very narrow instances and why former Gov. Jerry Brown called reform efforts “the Lord’s work.” It’s also why the Legislature grants CEQA exemptions whenever lawmakers think something really needs to be built, like sports stadiums.

Housing affordability is a serious challenge in California, but if bad policies got us into this mess they are not likely to get us out of it.

If we want to lower housing costs, we need to build more housing. If we want to make matters worse, rent control will be on the ballot.

Follow Matt on Twitter @FlemingWords