SB 50, not rent control, should be California's housing crisis solution

Effective Jan. 1, millions of California residential units became subject to statewide rent control and just cause eviction controls due to the passage of Assembly Bill 1482. While tenants may cheer, mind the old adage, "be careful what you wish for." Rent control may well limit rent increases on current occupied units and enable existing tenants to remain in their units longer; however, it discourages new housing starts and creates scarcity. Lack of housing supply is the true culprit causing high rents. So while existing tenants may appreciate their protected cocoon, rent control, (absent vacancy controls - which are probably next), does nothing for the successor tenant who would like to move to a community. Tenants will be less mobile to relocate for jobs, provide care of elder responsibilities, and pursue other life opportunities as they arise, for fear of losing their sacred rent-controlled housing. Cities and towns will become stagnant as long-time residents subsist in rent control units, potentially not even occupying all the bedrooms available, as some original tenants die or move away. This will create an even greater housing shortage. And landlords, because of reduced return on investment, are discouraged from maintaining their units properly.

The clear solution is to build more housing and offer subsidies, e.g. Section 8, and other programs for residents needing assistance to be able to afford decent housing. California is the hardest place in the world to develop a rental unit. Current planning laws strangle developers in red tape and add typically 25 percent to the cost of a unit to construct. It is not surprising that new units are few and the prices high. With new statewide rent control and just cause eviction controls, California has entered the rare stratosphere of states with similar laws, e.g. New York, New Jersey, Maryland, Oregon and the District of Columbia. Legislating price controls historically never works. The law of supply and demand is so basic and inherent that one wonders why California legislators can be so self-absorbed that they can "fix" the housing crisis, when the only thing that will resolve the issue is the construction of more housing.

A further unintended consequence of rent control is the creation of a two-tiered rental housing market. Similar units in the same building can have vastly different rental rates, because fortunately California did not include vacancy controls, e.g. the amount of rent that can be charged when the unit becomes vacant can go to market rate. Proposition 13 has created a similar situation where adjoining and similar size homes, using the same services, may pay vastly different property tax assessments.

California does have a de-facto system of vacancy controls with the advent of a year-round fire season. California Penal Code Section 396, an anti-rent gouging criminal statute, contains vacancy control provisions that apply during a State of Emergency declared by the Governor. A State of Emergency declaration has remained continuously in effect since the Northern California wildfires in October 2017.

As a result of rent control, those few units that do become available are bid up even higher because of that pesky "supply and demand" principle. Thus, we get inexpensive units that rarely turn over and absurdly high-priced units that are bid up because of supply constraints, coupled with strong discouragement for developers to construct new housing because of reduced return on investment. This is a triple whammy of apparently intended adverse consequences that Sacramento has unleased upon its citizens.

Politics, not rationality, is the reason AB 1482 was approved, as there are more tenants than developers and landlords. All three are necessary for a healthy eco-system and large blame, in my view, lays at the feet of the state and local government for failing to lead for decades in creating the proper regulatory environment to construct more housing through investment in infrastructure. That lack of leadership has now come home to roost in the form of SB 50 threatening to become the next housing watershed event in California with local jurisdictions are on the cusp of losing their sacred local control of zoning at least to some degree regarding housing if they do not act promptly as provided in the latest iteration of the proposed law.

The California didactic of state-wide rent control coupled with SB 50's mission to turn every single-family home into a four-plex effectively cancel each other out. There is a better way forward to solve the housing crisis--some form of SB 50 and no statewide rent control. Certain renter protections can be written into SB 50 regarding building demolition and percentage of low-cost housing required for new buildings. Then the principles of normal supply and demand govern, eliminating the pernicious effects of rent control, and more housing can be built where is it needed--near jobs, transit and services. Rather than turning our cities into deferred maintenance ghettos, we Californians can boost our economy through infrastructure development to support new housing and even achieve a reduction of global warming because we locate housing near jobs. And in turn, adequate housing supply stabilizes rents, providing tenants with a choice of housing opportunities from low to high cost. Just like most other things in life. 