"Rent control movements are growing and gaining momentum in California. Whether through the ballot or by lobbying local city councils, tenants increasingly identify as an organized political class fighting to respond to the current housing crisis and to build a powerful tenant-based movement.
However, certain interest groups continue to argue against the efficacy of rent control and just-cause evictions policies. Urban Habitat’s ongoing research on regional shifts in the Bay Area has already pointed to the tremendous hardships that low-income and working-class people face as housing costs spike and they are confronted with unaffordable rents, poor housing conditions, and no-cause evictions. While rent control and just-cause eviction policies are essential to stabilizing communities, a strong current of misinformation threatens the implementation of these vital policies.
The goal of this policy report is to investigate and challenge common arguments against rent control and justcause evictions. Urban Habitat studied rent boards and policy outcomes in Berkeley, Santa Monica, and Richmond to assess the effects of the most robust programs, and to detail the work and resources required for building a new rent board.
Among the brief’s key findings:
Rent control and just-cause evictions policies have protected social and economic diversity in Berkeley and Santa Monica, despite the pressures of vacancy decontrol-recontrol and the Ellis Act.
Policymakers should not assume a positive relationship between landlord profits, and property maintenance and local tax payments. The Berkeley Rent Stabilization Board has shown that less than 10% of rent increases went back into the community through reinvestment and taxes.
Rent control and just-cause evictions must be utilized as one prong of a protect, preserve, and produce housing strategy. Rent control and just-cause evictions help preserve affordable housing and protect tenants, but the production of affordable housing remains critical to broader success.
Rent control and just-cause evictions should be understood as anti-displacement measures with implications beyond housing policy. Displacement causes reverberations beyond individuals and families; local school districts, businesses, and governments are negatively affected when their students, employees, and constituents leave abruptly.
Tenant groups and policymakers should work to repeal Costa-Hawkins, which has been the most serious threat to strong rent control since its permanent implementation. New legislation should exempt new construction from rent control, but the “new” designation would expire after a specified number of years, at which point the unit would become subject to rent control" (page 4).
The impacts of the housing crisis in California are intensifying racial and economic inequality. A decade after the Great Recession, many of those who lost their homes to foreclosures are still not able to again become homeowners. The high cost of rent forces Californians to pay for housing with income they could otherwise put toward education, retirement, investments, and other productive uses that increase economic opportunity. It compounds the difficulty in becoming a homeowner by making it more challenging to save resources for a down payment on a home. Bottom line: the crisis does not just harm the people overburdened by housing costs, it is harmful to the very fabric and well-being of the larger communities.
The housing crisis stands in stark contrast to Californians' widely-held inclusive values and broad support for equitable policy. In a recent survey of Californians’ views, two-thirds of residents agreed with the statement, “We are all in this together. If some people are in poverty or struggling, we need to work together to alleviate the problem and help each other.”1
Yet the housing affordability crisis is putting these values to the test. Housing costs are largely responsible for California having the highest poverty rate in the nation when factoring in the cost of living. One out of five Californians are in poverty.2 Many Californians faced with unaffordable rents have to move involuntarily, pushed to the fringes of our communities if they are even able to stay in California at all.
In a deeper sense, this crisis is about who belongs— who has the ability and right to stay in their community. It is also about the consequences of othering—what Californians as a whole stand to lose if we turn our backs, displace, and exclude certain members of our society—for how we live everyday. The crisis threatens our collective ability to thrive, our progress, and vision for a fair society—the very core of what makes California what it is. It raises the question of how we can create true belonging—structural inclusion where institutions and policies meet and are responsive to people's needs. - page 4
Among the first concepts often taught in traditional economics classes are the notions that the minimum wage tends to reduce employment and that rent regulation tends to reduce housing availability. In recent years, the evidence supporting the negative impacts of the minimum wage has become increasingly weak: economists generally agree that moderate increases in the minimum wage have almost no discernible impacts on overall employment, partly because higher-paid workers have more money to spend, tend to be more motivated, and are often better matched with their jobs.
But what about rent regulation? It is important to note that popular demand for restricting rent increases tend to occur in times of acute housing shortfalls, such as in the U.S. during World War II. Early rent regulations were often quite severe in their application, but subsequent forms of rent control— viewed as the second generation of rent stabilization programs—tend to allow rents to rise as long as they remain below some target, offer decontrol if the property is vacated, and seek to stabilize housing through other mechanisms such as restrictions on evictions.
As in the minimum wage literature, the evidence on the impacts of these more moderate rent regimes is more mixed than older economics textbooks might indicate. Evidence suggests there is little negative impact on new construction, which is logical given that newly produced units have no initial rent targets. However, there is also research that suggests that rent regulations may lead landlords to reduce maintenance or take units off the market through conversion into condos or owner move-in evictions. Some proponents of rent regulations have argued for limiting what they see as loopholes by, for example, making condo conversion more difficult.
Renters in the controlled or impacted units tend to experience real welfare gains as rent increases lag. What is interesting is the spillover effects: a key experiment in Cambridge showed that the elimination of rent regulations led to rent increases in both controlled and non-controlled units. This effect is likely due to displacement from gentrification: as decontrol forced out lower-income residents, neighborhoods became more attractive to those better-off potential tenants who wanted to cluster among those of similar means.
Income clustering effects may also explain why studies of New Jersey—the state with the most jurisdictions with rent regulations—find little impacts on rent levels and unit availability once researchers control for income, neighborhood racial composition, and other related factors. Rent regulations, in short, benefit incumbent renters in controlled and maybe even proximate uncontrolled units by promoting housing stability. Indeed, the impact of rent regulations on neighborhood stability is one area where there is broad agreement in the literature.
A recent Stanford study on rent control in San Francisco concurred that there were positive effects of rent regulations on housing stability, although the study was made famous, in part, due the authors’ statement that rent regulations also “likely fueled the gentrification of San Francisco.” If gentrification is taken to mean displacement, it is important to realize that the study found that rent regulations promoted housing stability as beneficiaries of rent stabilization were 10 to 20 percent more likely to stay in their homes long-term. Rent regulations were found to confer nearly $3 billion in benefits on incumbent renters in the form of lower rents, but these welfare benefits were offset by decreases in available units (as landlords utilized loopholes allowing them to remove units that would be stabilized from the market) and subsequent rent increases in decontrolled units.
While this implies a sort of wash, the researchers note that 42 percent of the offsetting welfare loss was experienced by future residents—those yet to move to the city who presumably had higher incomes.
Because of this, the net benefit for incumbent residents was positive. Moreover, given the Cambridge finding about overall rent hikes after decontrol combined with research on vacancy control in California, one wonders whether the displacement from gentrification would have been even worse had rent regulations not been in place in the face of the tech boom.
Should we value housing stability? Certainly, this has long been an important public policy priority for the U.S., although almost all programs to support stability (federal loan guarantees, interest rate deductibility, and other mechanisms) are aimed at higher-income homeowners rather than lower-income renters. Housing stability is associated with physical, social, and psychological well-being; higher educational achievement by the young; and benefits for people of color. These gains are difficult to price into cost-benefit analyses, but they are real nonetheless and they help to explain why governments are willing to “distort” the free market to promote home ownership.
One criticism of rent regulations is that they are a blunt tool that can create a misallocation of housing resources—why exactly should a particular set of incumbent renters gain and is there a more targeted way to improve the lives of low-income renters? While this is a reasonable concern, a commonly proposed alternative solution of giving large subsidies to landlords to keep low-income residents in place seems a politically impractical giveaway. For example, there are currently nearly 190,000 residents in the city of Los Angeles queued up for 20,000 vouchers to close the rent gap, suggesting that the public generosity needed for what some see as an “optimal” solution is sorely lacking.
The current evidence cannot answer all the questions swirling about rent regulations. For example, much more needs to be known about the impacts on mom-and-pop (or small) landlords; one could imagine they might value the stability of tenants associated with rent regulation but lose from lower potential profits. In addition, more research is needed on the net impact on business activity; renters spending less on housing might be more able to spend on other local-serving business, and this potential spillover effect from rent regulation is one for which research has not generally accounted.
While more research remains to be done, the evidence does suggest that the strident debate about rent regulations may be driven more by ideology and self-interest—on all sides—and that public policy would benefit from a more measured discussion. What this review of literature suggests to us is that rent regulations are one tool to deal with sharp upticks in rent. They have less deleterious effects than is often imagined—particularly if we are talking about more moderate rent stabilization measures—and they do seem to promote resident stability and can therefore help to slow the displacement dimension of gentrification.
At the same time, proponents of rent stabilization must be clear that limiting rent increases cannot fully solve the housing crisis confronting much of urban California. That will require that rent regulations be combined with robust efforts to promote housing supply, particularly of affordable units, and job training and economic development programs that can lift incomes and promote mobility. Such a multipronged approach can help to deal with the housing stresses and strains that are currently worrying renters, owners, and employers alike (pg. 4-5).
Los Angeles’ history is marked by periods of severe housing affordability crises. Each of these periods was classified by unique social and economic circumstances. During World War II, rent control was part of a national effort to tamp down price gouging and support the war effort. The 1970s was characterized by hyper-inflation that drove up home prices and rents in predominantly White, middle-class communities.
Today’s crisis is different. While seniors and other tenants in the 1970s were hard hit by rent increases, they were decidedly “middle class.” They had something to fall back on – job skills, small savings, or investments. When push came to shove, many could find ways to make do. The victims of today’s housing affordability crisis include the lowest-income renters who make up a much-higher percentage of the city’s population. They have little to fall back on – except the street
What began as a problem for largely White, senior, middle-class tenants living in L.A.’s most desirable areas has turned into a problem for every segment of the rental population, from the very poor to the middle class to those who have been priced out of homeownership; from South LA to the Westside to the San Fernando Valley. What began as an effort to protect seniors living on fixed incomes is today not enough to keep renters of all ages in their homes and off the streets. This problem extends beyond city boundaries as evidenced by rent control movements now active in Inglewood, Long Beach, Glendale and Pasadena. There are also movements afoot to amend or repeal Costa-Hawkins and the Ellis Act. Indeed, Los Angeles Mayor Eric Garcetti and the Los Angeles Times have endorsed the Costa-Hawkins repeal
This crisis demands action. The time has come to reassess the City of Los Angeles’ Rent Stabilization and related tenant protection ordinances to address our most vulnerable, rent-burdened populations. The ability to effect change at the city level is limited by state law, but that does not preclude political leaders and concerned citizens from advocating for changes to that law and amending local law where possible (pg. 18).