California

Can rent control solve the housing crisis? California leaders are divided

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The California Influencers Series

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When California voters get tired of waiting for their politicians to act, they turn to the statewide ballot initiative as their weapon of last resort.

The Sacramento Bee’s readers have been telling us for months through the “Your Voice” feature that the out-of-control cost of housing has become a major concern — if not cause for alarm. So it should be no surprise that when Californians cast their general election ballots this fall, more than one-third of the measures on their ballot are designed to address the need for affordable housing.

None of those four ballot measures will attract more attention, more emotion and more money than Proposition 10, which would allow California cities and counties to adopt stronger rent control laws. The Bee’s California Influencers are fiercely divided on the measure, reflecting the acrimony that will surround the campaign.

“Whether housing or health care, the path to controlling the affordability crisis is similar, stop the price gouging,” said California Nurses Association Executive Director Bonnie Castillo. “… Wealthy developers, landlords and corporate lobbyists are spending tens of millions to deceive the public, but all they really care about is protecting their sky-high profits.”

“For far too long, progressive politicians have backed interventions in the housing marketplace — such as restrictive zoning rules or rent control initiatives like Proposition 10 … that do nothing but limit the supply of affordable housing and drive up prices for the poor and middle-income residents of our state,” said Hoover Institute Fellow Lanhee Chen, policy director for Mitt Romney’s 2012 presidential campaign.

“(Proposition 10) will result in a housing freeze, already developers are waiting to see if it will pass before investing in new projects. Smaller landlords will likely leave the rental business completely,” agreed Adama Iwu, lobbyist and co-founder of We Said Enough.

Voting advocate Astrid Ochoa pushed back, citing the impact of rent increases on working families. Proposition 10, she said, “will help slow down the accelerated increase in rents we are seeing in areas that are gentrified. I understand that landlords need to offset cost of maintaining their properties, but…(t)hese hikes are unrealistic and it is forcing families to spend beyond their means ….”

Former U.S. Rep. Tom Campbell, a Republican who represented parts of Silicon Valley and now is a professor of Law and Economics at Chapman University, acknowledged the potential impact on low-income renters. He proposed a potential solution.

“By allowing cities to impose rent control on all new housing, Prop. 10 would inadvertently limit the supply of new housing. It is straightforward economics that capping the price of a good or service will result in less being produced,” Campbell said. “(But for) those unable to pay, cities and the state can adopt rental subsidies paid for by all of us, rather than imposing costs only on the very parties trying to build the housing.”

Sierra Health Foundation President and CEO Chet Hewitt acknowledged Campbell’s premise, but argued that Proposition 10 addressed a more urgent challenge. “Opponents of Prop. 10 argue that it will distort the market and lead to fewer investments in rental housing. That may be true,” said Hewitt. “However, I’d argue that the market is already distorted, in favor of the well to do, and requires enforceable public policy interventions to correct it.”

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Other Influencers acknowledged benefits of rent control, but still expressed reservations about its pitfalls.

“The judicious use and expansion of rent control can and will hold rents down, but unfortunately it will also reduce the number of new rental units built as investors fear they will not be able to gain from their dollars,” said California Democratic Party Chairman Eric Bauman.

“… rent control is an important tool that can vastly improve accessibility to the state’s existing housing supply,” added Maria Mejia, Los Angeles director for the Gen Next advocacy organization. “But its benefits are short term, and serve to directly discourage developers from building, particularly in high cost cities and parts of the state that will continue to see significant population growth over the next few decades and where new housing units are drastically needed.”

But Manuel Pastor, Director of USC’s Program for Environmental and Regional Equity, pointed to potential economic advantages of rent control.

“New research,” Pastor said, “suggests that if tenants were not what the government considers ‘rent-burdened’ — that is, spending more than 30 percent of household income on housing — they would have an additional $4.4 billion to pump into local markets rather than landlord coffers. Proposition 10 would allow our state’s cities and counties to use all the tools they need to tackle today’s housing challenges and encourage inclusive prosperity.”

Michele Siquieros, president of the Campaign for College Opportunity, attempted to reconcile the two perspectives, advocating for rent control but pointing out it is only one aspect of an comprehensive affordable housing strategy.

“The reality is that California needs both limits on rent increases that allow low-income and middle-income families the ability to stay housed AND we need major investments in building (denser) housing to address challenges by both public and private investors,” she said.

Dan Schnur, a veteran analyst and longtime participant in California politics, is director of the California Influencers series for The Sacramento Bee and McClatchy.

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