Using ‘tiny homes’ to address housing crisis

Tiny-Home-Under-Construction-640x360Sacramento has become the latest city to consider responding to California’s acute housing crisis with “tiny homes” – small, prefabricated studio homes with bathrooms and built-in hook-ups for electricity and water.

In an era in which $2,000 apartment rentals, $600,000 homes and $300,000-plus “affordable” public housing units are normal in the Golden State, the appeal of housing that can cost as little as $40,000 per unit is obvious to government leaders dealing with growing homelessness and increased fears that expensive housing will make it difficult to attract needed workers or drive them away.

Sacramento Mayor Darrell Steinberg last month proposed spending $21 million to help pay for the addition of up to 1,000 such homes – from prefab 300-square-foot modular homes to container units that could be set up inside warehouses. Steinberg offered the proposal as the centerpiece of his agenda to respond to his city’s homelessness problem and suggested that public housing vouchers could be used for construction costs.

“It’s all in our grasp,” the mayor said in his annual State of the Downtown address. “Public funding, private funding, tangible goals, public accountability and a community commitment to whatever it takes to make this homeless problem better in Sacramento.”

Sacramento only added 235 housing units in its central city in 2017, according to the Sacramento Bee. The newspaper also recently reported that in one eight-day stretch in January, nearly 35,000 residents got on the waiting list for public housing vouchers, formerly known as Section 8 vouchers.

San Jose, Fresno, Clovis see potential in housing alternative

Some other local governments in California pursuing “tiny homes”:

San Jose – In December, the City Council voted 9-2 for a $2.3 million “tiny home” pilot program in which 40 homes would be built in one location. If the project works out, officials hope to add “tiny home” villages in each of the 10 City Council districts, the San Jose Mercury-News reported.

The cost of the first 40 homes is $73,125 each – a pittance in the metro area which in 2016 became the first in the nation to have homes cost an average of more than $1 million, according to the National Association of Realtors.

Fresno – In 2016, it became one of the first cities in the nation to formally encourage “tiny homes” when a law took effect. “The pint-sized houses on wheels – complete with kitchen, living room and loft – are now considered backyard cottages thanks to changes in the city’s zoning and development code,” the Fresno Bee reported. “That means tiny homes can be used as independent living quarters on the same lot as a single-family house granted it meets some requirements. Previously, the mobile units could only serve as temporary lodging.”

The 270-square-foot model pre-approved by the city is built by a Fresno firm. Prices start at $45,000.

Clovis – In June, in interviews with the Fresno Bee, city officials touted a long-term development plan for the city’s Old Town that sees “tiny homes” of no more than 400 square feet build in residential alleys as the key to its revitalization.

City officials are working with a local builder to develop three models with designs that are pre-approved by the city and are available for free to the public. The city believes the “tiny houses” would cost about $50,000 on average, according to areport from Fresno County’s ABC 30 News.

Perhaps the American city farthest down the road in embracing the small housing approach is Boston. In 2014, Boston Mayor Martin J. Walsh launched a Housing Innovation Laboratory. City officials have developed a prototype called an Urban Housing Unit, or Uhu,  a 385-square-foot modular apartment. The prototype, which may cost as little as $40,000 to manufacture, is pictured above.

This article was originally published by CalWatchdog.com

California had 77 of the country’s 100 most expensive ZIP Codes for home sales last year

A year-end report from real estate database PropertyShark has confirmed what every Angeleno already knows: California is a really expensive place to live.

The analysis, which surveyed the priciest ZIP Codes in the country based on median home sales prices, found that California holds 77 of the 100 most expensive spots, including five in the top 10.

New York came in with the second most ZIP Codes at 19. No other state had more than two.

Topping the list of most expensive ZIP Codes was 94027 in Atherton, Calif., a Silicon Valley city full of tech executives, which had a median sale price of $4.95 million, according to the data.

The 10013 ZIP Code of New York, home to the high-priced luxury condos of Tribeca in Manhattan, saw a median price of $4.1 million. In Miami Beach area, the 33109 ZIP Code the median was $4.052 million. …

Click here to read the full story from the L.A. Times

Making housing more expensive to build won’t make it more affordable

Housing apartmentOnly a politician could believe that making housing more expensive to build will create more affordable housing.

But in Los Angeles, that’s what Mayor Eric Garcetti and the City Council are asserting. In December, they approved a new “linkage fee” on new development aimed at raising $100 million per year toward a goal of building 1,500 units of new affordable housing annually.

Don’t bother with the math. They didn’t.

The idea of a linkage fee, which exists in some other cities, is to get money from developers whose projects will displace residents in existing housing or generate a need for additional housing, something that could happen if a new workplace was built.

Hardly anybody is building a new workplace in Los Angeles unless it has a drive-through, but play along.

The “linkage fee” in Los Angeles won’t specifically be linked to the impact from a project. It’s simply a new fee for building in the city.

The early draft of the linkage fee, which has been on Mayor Garcetti’s wish-list since 2015, would have imposed the same fee for similar developments regardless of where they were located in the city. But some council members objected to the one-size-fits-all charge.

So the final version divides the city into “high-market” areas like downtown, Venice and Brentwood, and “low-market” areas like South Los Angeles.

The linkage fee for office, hotel, retail and other commercial buildings is $3 per square foot in low-market areas, $5 per square foot in high-market areas.

For residential developments, the fee is even higher: $8 per square foot in a low-market area, $15 per square foot in a high-market area.

The money will go into the city’s Affordable Housing Trust Fund, and city officials say they’ll spend it to build hundreds of units of affordable housing.

Unfortunately, the number of Los Angeles residents who are in need of affordable housing is in the tens of thousands, and those are just the people sleeping on the sidewalks.

Meanwhile, the cost of all other new housing will go up, because developers have to pay these huge new linkage fees just to be allowed to build it.

There are two ways that residential developers can avoid the fees. One is by reserving a percentage of units in their projects for low-income renters. The other option, which is also available to developers of commercial projects, is to get out of Los Angeles and build somewhere else.

Many cities in the Southern California region don’t have linkage fees and don’t treat the construction of a commercial or residential building as a sin that requires some sort of political or financial penance.

In some places, local governments even offer incentives for developers and businesses, to encourage building and hiring.

That’s rare in Los Angeles, where the breathtaking decay of the city is considered incentive enough.

The state Legislative Analyst’s Office has done extensive research into the problem of housing affordability in California, including a detailed report released in the spring of 2016 titled, “Perspectives on Helping Low-Income Californians Afford Housing.”

“The scope of the problem is massive,” the report said, “Millions of Californians struggle to find housing that is both affordable and suits their needs. The crisis also is a long time in the making, the culmination of decades of shortfalls in housing construction. And just as the crisis has taken decades to develop, it will take many years or decades to correct. There are no quick and easy fixes.”

The LAO concluded that while “affordable housing programs are vitally important to the households they assist, these programs help only a small fraction of the Californians that are struggling to cope with the state’s high housing costs.”

To build public-subsidized affordable housing for the 1.7 million low-income California households that spend more than half their income on rent would cost more than $250 billion, by the LAO’s estimate.

But the problem is not just math, it’s logic. When it becomes more expensive to build housing, then less housing is built, and what is built is more expensive.

The LAO report said the real solution is more housing construction, and the scale of the problem can only be matched by privately built, market-rate housing.

“Doing so will require policy makers to revisit long-standing state policies on local governance and environmental protection, as well as local planning and land use regimes,” the report concluded.

So there really is something the government can do about housing affordability. It can get out of the way.

This article was originally published by Fox and Hounds Daily

Progressive Cities: Home of the Worst Housing Inequality

America’s most highly regulated housing markets are also reliably the most progressive in their political attitudes. Yet in terms of gaining an opportunity to own a house, the price impacts of the tough regulation mean profound inequality for the most disadvantaged large ethnicities, African-Americans and Hispanics.

Based on the housing affordability categories used in the Demographia International Housing Affordability Survey for 2016 (Table 1), housing inequality by ethnicity is the worst among the metropolitan areas rated “severely unaffordable.” In these 11 major metropolitan area markets, the most highly regulated, median multiples (median house price divided by median household income) exceed 5.0. For African-Americans, the median priced house is 10.2 times median incomes. This is 3.7 more years of additional income than the overall average in these severely unaffordable markets, where median house prices are 6.5 times median household incomes. It is only marginally better for Hispanics, with the median price house at 8.9 times median household incomes, 2.4 years more than the average in these markets (Figure 1).

The comparisons with the 13 affordable markets (median multiples of 3.0 and less) is even more stark. For African-American households things are much better than in the more progressive and most expensive metropolitan areas. The median house prices is equal to 4.6 years of median income, 5.5 years less than in the severely affordable markets. Moreover, for African-Americans, housing affordability is only marginally worse than the national average in the affordable market.

Things are even better for Hispanics, who would find the median house price 3.8 times median incomes, 5.1 years less than in the severely affordable markets. This is better than the national average housing affordability.

Among the four markets rated “seriously unaffordable,” (median multiple from 4.1 to 5.0) the inequality is slightly less, with African-Americans finding median house prices equal to 2.2 years of additional income compared to average. The disadvantage for Hispanics is 1.5 years.

In contrast, inequality is significantly reduced in the less costly “moderately unaffordable” markets (median multiple of 3.1 to 4.0) and the “affordable” markets (median multiple of 3.0 and less).

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The discussion below describes the 10 largest and smallest housing affordability gaps for African-American and Hispanic households relative to the average household, within the particular metropolitan markets. The gaps within ethnicities compared to the affordable markets would be even more. The four charts all have the same scale (a top housing affordability gap of 10 years) for easy comparison.

Largest Housing Affordability Gaps: African American

African-Americans have the largest housing affordability inequality gap. And these gaps are most evident in some of the nation’s most progressive cities. The largest gap is in San Francisco, where the median income African-American household faces median house prices that are 9.3 years of income more than the average. In nearby San Jose ranks the second worst, where the gap is 6.2 years. Overall, the San Francisco Bay Area suffers by far the area of least housing affordability for African-Americans compared to the average household.

Portland, long the darling of the international urban planning community, ranks third worst, where the median income African-American household to purchase the median priced house. Milwaukee and Minneapolis – St. Paul ranked fourth and fifth worst followed by Boston, Seattle, Los Angeles, Sacramento and Chicago (Figure 2).

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Largest Housing Affordability Gaps: Hispanics

Two of the three worst positions are occupied by the two metropolitan areas in the San Francisco Bay Area. The worst housing affordability gap for Hispanics is in San Jose, a more than one-quarter Hispanic metropolitan area where the median income Hispanic household would require 5.0 years of additional income to pay for the median priced house compared to the average. Boston ranks second worst at 3.9. San Francisco third worst at 3.3 years. Providence and New York rank fourth and fifth worst. The second five worst housing inequality for Hispanics is in San Diego, Hartford, Rochester, Philadelphia and Raleigh (Figure 3).

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The San Francisco Bay Area: “Inequality City”

Perhaps no part of the country is more renowned for its progressive politics and politicians than the San Francisco Bay Area. Yet, in housing equality, the Bay Area is anything but progressive. If the African-American and Hispanic housing inequality measures are averaged, disadvantaged minorities face house prices that average approximately 6.25 years more years of median income in San Francisco and 5.60 more years of median income in San Jose.

Moreover, no one should imagine that recent state law authorizing a $4 billion “affordable housing” bond election will have any significant impact. According to the Sacramento Bee, voter approval would lead to 70,000 new housing units annually, when the need for low and very low income households is 1.5 million. The bond issue would do virtually nothing for the many middle-income households who are struggling to pay the insanely high housing costs California’s regulatory nightmare has developed.

Smallest Housing Affordability Gaps: African-American

Tucson has the smallest housing affordability gap for African-Americans. In Tucson, the median income African-American household would pay approximately 0.4 years (four months) more in income for the median priced house than the average household. In San Antonio, Atlanta and Tampa – St. Petersburg, the housing affordability gaps are under 1.0. Houston, Riverside – San Bernardino, Virginia Beach – Norfolk, Memphis, Dallas – Fort Worth and Birmingham round out the second five. It may be surprising that eight of the metropolitan areas with the smallest housing affordability gaps for African-Americans are in the South and perhaps most surprisingly of all that one of the best, at number 10, is Birmingham. (Figure 4).

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Smallest Housing Affordability Gaps: Hispanic

Among Hispanic households, the smallest housing affordability gap is in Pittsburgh, where the median priced house would require less than 10 days more in median income for a Hispanic household compared the overall average. In Jacksonville the housing affordability gap for Hispanics would be less than two months. In Baltimore, Birmingham, St. Louis and Cincinnati, the median house price is the equivalent of less than six months of median income for an Hispanic household. Detroit, Memphis, Virginia Beach – Norfolk and Cleveland round out the ten smallest housing affordability gaps for Hispanics (Figure 5).

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Housing Affordability is the Best for Asians

Recent American Community Survey data indicated that Asians have median household incomes a quarter above those of White Non-– Hispanics. This advantage is also illustrated in the housing affordability data. Asians have better housing affordability than White Non-– Hispanics in 37 of the 53 major metropolitan areas (over 1 million population).

The Importance of Housing Opportunity

Housing opportunity is important. African-Americans and Hispanics already face challenges given their generally lower incomes. However, by no serious political philosophy, progressive or otherwise, should any ethnicity find themselves even further disadvantaged by political barriers, such as have been created by over-zealous land and housing regulators.

Cross-posted at New Geography.

isiting professor, Conservatoire National des Arts et Metiers, Paris

Jerry Brown signs new California affordable housing laws

As reported by the Sacramento Bee:

Gov. Jerry Brown on Friday signed a robust package of housing legislation aimed at addressing California’s unprecedented affordability crisis.

“These new laws will help cut red tape and encourage more affordable housing, including shelter for the growing number of homeless in California,” Brown said in a statement.

He signed the bills at the Hunter’s View public housing project in San Francisco’s Bayview-Hunters Point neighborhood, with the Bay Bridge as a backdrop.

“Today, you can be sure we got 15 good bills. Have they ended the need for further legislation? Unfortunately not,” Brown said. …

Click here to read the full story

Poll: Californians consider moving due to rising housing costs

Money

A majority of voters in California have considered moving due to rising housing costs, according to new findings from the Berkeley Institute of Governmental Studies, with 1 in 4 saying that if they moved it would be out of the state for good.

It’s just the latest piece of evidence on the state’s housing crisis, as residents confront a shrinking supply of homes and rising costs, leading many to wonder if they’d be better off elsewhere.

“When you then ask them where they would relocate, they’re often throwing up their hands,” poll director Mark DiCamillo said, according to the LA Weekly. “Millennials seem to be the most likely to say they’d consider leaving.”

The uneasiness about the market appears most dramatically in the Bay Area, where 65 percent of those polled said they’re facing an “extremely serious” housing affordability problem.

But even in Los Angeles and San Diego, 59 percent and 51 percent, respectively, have considered re-locating over housing affordability issues.

The IGS poll sampled 1,200 registered California voters from late August through early September.

In Los Angeles specifically, a recent analysis found that a person needs to earn over $109,000 per year to afford a two-bedroom apartment in the city, with the assumption that renters are spending 30 percent or less of their income on housing.

Across the entire state, the median rent for a one-bedroom apartment is $1,750 and a two-bedroom averages $2,110.

“These are very dramatic findings,” DiCamillo added, according to the Mercury News. “In every region of California, the rising cost of housing has crept into the consciousness of voters.”

The median price of a single-family home rose around 7 percent year-over-year to $565,330 in California this past August – and in Santa Clara County, the heart of Silicon Valley, the median price jumped a shocking 17.9 percent year-over-year to $1,150,000.

The state Legislature is taking notice, passing 15 bills this month relating to housing affordability, seeking to increase the pace at which housing construction takes place.

For example, Senate Bill 2 and Senate Bill 3 provide new funding for low-income housing, while SB35 attempts to streamline the approval process for construction in municipalities that fall behind Sacramento’s housing goals.

While California boasts some of the highest earners, it also has the nation’s highest poverty rate when housing costs are factored in, resulting in a heightened sense of urgency in a state that has some of the biggest regulatory hurdles for new home building.

This article was originally published by CalWatchdog.com

California’s historic housing legislation won’t bring down costs anytime soon

As reported by the Sacramento Bee:

California lawmakers this year took historic action to address what one housing economist says is the state’s most serious problem: unaffordability.

“Over the past 30 years, we’ve made it very difficult to build new housing and wages have not kept pace with the rising cost of house prices or rents, to the point it has grown into a crisis. It’s the single biggest problem California faces,” said Ken Rosen, a professor at UC Berkeley’s Haas School of Business and chair of the Fisher Center for Real Estate and Urban Economics. “If we don’t solve this problem, the economic impacts over the next five to 10 years will be devastating.

“Companies will move out. Young people won’t be able to afford to stay here. As people retire, they’ll move, and California will no longer be the Golden State,” Rosen said.

Democrats in the Legislature – and one Republican – have advanced to Gov. Jerry Brown a package of housing bills that seek to stem the bleeding. Through a spokesperson, Brown said he supports each of the 15 bills, which provide new funding for low-income housing development, seek to lower the cost of construction, fast-track building and restrict the ability of cities and counties to block new development. …

Click here to read the full article

Poll finds Californians consider leaving state due to rising housing costs

urban-housing-sprawl-366c0A majority of voters in California have considered moving due to rising housing costs, according to new findings from the Berkeley Institute of Governmental Studies, with 1 in 4 saying that if they moved it would be out of the state for good.

It’s just the latest piece of evidence on the state’s housing crisis, as residents confront a shrinking supply of homes and rising costs, leading many to wonder if they’d be better off elsewhere.

“When you then ask them where they would relocate, they’re often throwing up their hands,” poll director Mark DiCamillo said, according to the LA Weekly. “Millennials seem to be the most likely to say they’d consider leaving.”

The uneasiness about the market appears most dramatically in the Bay Area, where 65 percent of those polled said they’re facing an “extremely serious” housing affordability problem.

But even in Los Angeles and San Diego, 59 percent and 51 percent, respectively, have considered re-locating over housing affordability issues.

The IGS poll sampled 1,200 registered California voters from late August through early September.

In Los Angeles specifically, a recent analysis found that a person needs to earn over $109,000 per year to afford a two-bedroom apartment in the city, with the assumption that renters are spending 30 percent or less of their income on housing.

Across the entire state, the median rent for a one-bedroom apartment is $1,750 and a two-bedroom averages $2,110.

“These are very dramatic findings,” DiCamillo added, according to the Mercury News. “In every region of California, the rising cost of housing has crept into the consciousness of voters.”

The median price of a single-family home rose around 7 percent year-over-year to $565,330 in California this past August – and in Santa Clara County, the heart of Silicon Valley, the median price jumped a shocking 17.9 percent year-over-year to $1,150,000.

The state Legislature is taking notice, passing 15 bills this month relating to housing affordability, seeking to increase the pace at which housing construction takes place.

For example, Senate Bill 2 and Senate Bill 3 provide new funding for low-income housing, while SB35 attempts to streamline the approval process for construction in municipalities that fall behind Sacramento’s housing goals.

While California boasts some of the highest earners, it also has the nation’s highest poverty rate when housing costs are factored in, resulting in a heightened sense of urgency in a state that has some of the biggest regulatory hurdles for new home building.

This article was originally published by CalWatchdog.com

Bill would bring California redevelopment agencies back to life

Housing apartmentSACRAMENTO – California’s redevelopment agencies were a fixture on the local political landscape for six decades, as they guided development policies and grabbed “tax increment financing” that localities used to pay for infrastructure improvements, downtown renovations and affordable-housing projects. They had some notable successes but generated enormous controversy before Gov. Jerry Brown shuttered them in 2011.

They were designed in the 1940s to fight urban blight. But the agencies were criticized for their use of eminent domain on behalf of private companies; for running up debt without a vote; for the subsidies they ladled out to developers; and for financing big-box stores and auto malls rather than helping inner cities spruce up. The governor ultimately killed them because these agencies had become a drain on the state’s general-fund budget, consuming 12 percent of the budget.

It was a shock to see such a powerful sector dry up, as local agencies morphed into “successor agencies” that had nothing left to do other than pay off existing debt. But the redevelopment industry – the developers, lobbyists, city officials and low-income housing advocates – never really went away. Each year since 2011, lawmakers have proposed and sometimes passed measures that incrementally bring back the redevelopment process.

The way that complex process worked in the past involved city councils essentially creating agencies that target “project areas” for subsidy. The agencies would float debt to fund infrastructure and pay subsidies to developers who build things within those areas. Cities often would subsidize retail projects because of the sales taxes they provided. The gain in the property taxes from the new development was designed to pay off the debt.

But those taxes often come out of the hide of other public services, such as schools and public safety. The state budget had to backfill the losses and the result was the budgetary drain that the governor plugged. But with the state’s fiscal situation having improved markedly since 2011, legislators have been less concerned about any financial impact of revived agencies.

In 2015, the governor signed Assembly Bill 2, which created Enhanced Infrastructure Finance Districts (EIFD) that have many similarities to the old redevelopment project areas. Under the old law, redevelopment officials would simply declare an area blighted before gaining new powers of subsidy and debt funding within that area. Under what some called Redevelopment 2.0, those borrowing and spending powers were limited to infrastructure projects.

To prevent some of the old fiscal abuses, the new EIFD process bans the newly created agencies from unilaterally creating project areas that would steal tax revenue from counties, fire authorities or school districts. Instead, they would have to gain the approval of the other districts, thus providing incentive for a less controversial project. These projects also lacked the affordable-housing requirement that was found in the old redevelopment law.

This year, affordable housing is the Legislature’s pet issue in its final week of session. The governor and Democratic leaders have promised a legislative package to deal with the state’s housing crisis. Lawmakers also are considering Assembly Bill 1568 by Assemblyman Richard Bloom, D-Santa Monica, which would add a housing component to those infrastructure districts. Critics say it’s creeping redevelopment, combined with an expanded ability for local governments to raise taxes.

“Local governments have been without a reliable financing mechanism to invest in economically depressed, transit-rich areas since the demise of redevelopment agencies in 2011,” Bloom said in a Senate Rules Committee analysis. This proposal “provides local jurisdictions with the authority to finance infrastructure and affordable housing using new sales and use taxes in addition to property tax increment within qualifying districts.”

Lawmakers are expected to make technical amendments Friday and then send it to the Senate floor for a vote Monday. The bill requires that the Enhanced Infrastructure Financing Districts use the new taxes to fund affordable housing on infill sites. The measure has passed its committees on a largely party-line vote, with most Democrats favoring it and most Republicans opposing. It’s backed by several planning and local-government organizations, and has a high likelihood of making it to the governor’s desk by the Sept. 15 deadline.

If that’s so, then it will be interesting to see whether Gov. Brown, who fought so hard to eliminate redevelopment agencies, is willing to let them return incrementally, albeit with a different name and somewhat different rules.

Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

This article was originally published by CalWatchdog.com

Rent Control Makes for Good Politics and Bad Economics

affordable housingOne needn’t read very much about public policy before coming across some statement to the effect that “bad economics makes good politics.” This statement is clearly untrue when good politics is defined as furthering mutually beneficial arrangements, as good economics is central to that task. But the statement is often true when good politics is defined as attracting 50%-plus-one votes on some issue or candidate, which is a much different standard, leaving plenty of room for government-imposed harms to be imposed on citizens.

Few issues reflect this divergence between “good” politics and bad economics more clearly than rent control. 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. Despite that, it has been adopted as policy in many places and times — and now is a good time to revisit these issues, as efforts are currently underway in several states (including California, Oregon, Washington, and Illinois) to repeal existing statewide restrictions on rent control.

How Rent Control Destroys Value

Rent control takes a large portion of the value of residential properties from landlords. It does so by removing owners’ rights to accept offers willingly made by potential renters. And the value of the rights involved are large. For example, after Toronto imposed rent control in 1975, affected building values fell by 40% over five years, and a decade ago, such losses were estimated at $120 million annually in Santa Monica. A law like rent control, which can take half or more of each apartment’s value from the landlord, harms them just as much taking away half of their apart­ments, even though the latter is recognized as theft. Those stripped property values are given to current tenants, whose resulting bonanzas are shown by the fact that those under strict rent control almost never leave.

Rent-Controlled United Decline in Quality and Quantity

By taking away so much of the effective ownership of rental housing from owners, rent control creates several other additional adverse effects. Without owners’ ability to capture the value of their buildings, the rental housing stock deteriorates in both quantity and quality. Reduced incentives for maintenance and repair erodes existing rental housing. Further, owners retain little incentive to construct new rental units, bringing new apartment construction to a virtual halt, taking with it local construction jobs and tax revenues. Rental units are also converted to condos and non-housing uses to escape the burdens rent control imposes. All of this reduces rental housing availability, which worsens the problem of inadequate housing rather than alleviating it.

Rent control also increases discrimination and landlord-tenant hostility. Owners who can no longer be compen­sated for increased costs created through crowding, water usage, potential damage, or reduced probabili­ty of actually paying the rent — or any other unattractive tenant charac­teristic — have sharply reduced incentives to accommodate those who might impose them. This is why rent controlled areas, rather than helping those of low and moderate means, become increas­ingly popu­lated by higher income tenants with few children. Further, tenants bla­me “greedy” land­lords for not providing the services they desire, and landlords view tenants as the enemy engaged in an ongoing rip-off, even though rent control is the real culprit.

Rent Control Creates Black and Gray Markets

Rent control’s artificial restrictions on mutually agreed upon exchanges also lead to evasion attempts, such as under-the-table payments, agreements to renovate apartments or upgrade appliances at private expen­se, personal connections, etc. Not only do these alterna­tive forms of competition favor higher income renters, rather than “the poor” (who populate rent control rhetoric but far less of the housing available under it), they lead to rent control boards to stymie such at­tempts. That enforcement, as well as the costs land­lords must bear both to defend them­selves and comply with its edicts, consumes a great deal of resour­ces that could have been put to productive uses.

Despite such an overwhelming case for rent control being bad economics, why has it not been equally politically unattractive? The essential reason is that in cities where rent control is imposed, existing local renters, who are the recipients of the value taken from landlords, form a political majority who approve of that theft, vote for it, and go to great lengths to rationalize and defend it as part of “the wonders of democracy.”

Rent control offers current tenants perhaps the greatest economic returns of any policy they could use their majority power to enact. Not only do they save what can far exceed $1,000 a month compared to what market prices would be, they are also awarded what amounts to life tenure. If you saved $1,000 a month and stayed 10 years, that would be $120,000, while staying 21 years would generate over a quarter million dollars in benefits. And many long-term tenants have saved themselves far more. What other political act offers local renters so great an economic benefit in exchange for their votes?

Rent control’s “pro renter” rhetoric also allows a powerful form of misrepresentation. Rent control benefits current renters, but it does not benefit renters overall. It harms all renters and potential renters who aren’t already in rent-controlled units. It harms all those who seek to rent apartments after rent control is imposed, mainly finding “no vacancy” signs instead. But they don’t get a vote in the communities to which they’d like to move. Even though those who are eventually successful in finding a controlled unit have been harmed, once there, they don’t want their finally-achieved good deal halted. Rent control also harms renters in surrounding communities, as the restricted supply of available units raises rents there, as well. But they don’t get a vote, either. Rent controls also harm those who rent houses, which are usually exempt, because rent control’s reduction in housing availability leads those rents to be bid up as well.

Rent control also involves unusual characteristics that weakens and divides opposition.

The Long-term Effects of Rent Control

Because housing is durable, there is an unusually sharp dichotomy between short-run and long-run effects. The short-term effect of imposing rent controls on the available supply of rental units is quite small. Proponents can focus only on the immediate effects to argue that objections are unsubstantiated. However, the cumulative effect of ongoing rent control is very large, leading many economists over the years to recognize its ability to decimate the supply of urban housing.

Property owners, who might be expected to be unified in opposition to the threat to property rights rent control poses, are also subject to divide and conquer techniques.

Not only are rental housing owners far outnumbered by current tenants, many of them live outside the jurisdiction considering rent control, undermining their voice. And if they raise money for an opposition campaign, their efforts against the harm that would be imposed on them can be easily demonized as proof of how much they rip off tenants whenever they are given a chance.

Some Property Owners Benefit

Property owners are also split in other ways. Owners in neighboring areas, who would otherwise tend to side with those in the jurisdiction considering rent control, due to the similar threat posed against them, can be bribed away because the reduction of housing supply “next door” increases their demand and raises their rents. Owners of commercial property, who are usually exempt from rent control, can benefit from higher rents for their properties due to the influx of higher income residents rent control brings. The restriction in supply of rental units in an area also raises the price of owner-occupied homes, undermining their support against rent control.

Rent control can give current tenants massive windfalls taken from owners by their dominant majority vote. That also means politicians who cater to that politically dominant majority can more easily acquire and maintain power. The fact that current tenants benefit at the expense of those in nearby areas and all other future prospective tenants can be masked by pretending current tenants interests are the same as all actual and prospective tenants. Rent control also splits owner opposition to the threat of expropriation by exempting commercial uses and houses in the jurisdiction by increasing the value of their properties, as does the spillover gains they capture from the reduced supply of rental housing nearby. That combination goes a long way to explain why, in majority renter areas, the truly bad economics of rent control frequently translates into “good” 50%-plus-one piracy politics.

Gary M. Galles is a professor of economics at Pepperdine University. He is the author of “The Apostle of Peace: The Radical Mind of Leonard Read.”