Despite good intentions, rent control will not have the benefits claimed by its proponents.
Rent control only keeps rents stabilized for those living in rent-controlled units. In California, these are apartments built before 1995. For people living in rent-controlled apartments, especially those who stay in their rent-controlled housing for a long time, this will be a very good right. For every tenant of the more than 6,400 units built since 1995 in Pasadena, that would mean rent increases, likely substantial rent increases over time.
We don’t need studies to tell us that rent control drives rents up. Just look at Santa Monica, where rent control has been in place for decades but rents are the fifth highest in the United States, according to rent.com and apartments.com.
University studies also confirm this.
In an article for EconLib, an online library of writings by economists, Walter Block notes: “Economists are virtually unanimous in concluding that rent control is destructive. He further explains that in a survey of 464 economists in the United States, 93% agreed “that a cap on rents reduces the quantity and quality of available housing”.
There are good reasons why economists are almost universally opposed to rent control.
Rent control encourages condominium conversions. A Stanford University study found that rent control laws led to a 15% reduction in rental supply in San Francisco and a 5.1% increase in rents across the city. Diamond, McQuade and Quian, in their 2018 study of rent control in San Francisco, found that it caused an 8% increase in condominium conversions, a 15% drop in the total number of tenants and a 25% drop in % of the number of rented tenants. controlled units.
Rent control Leads to the deterioration of rental housing. In his nationwide research, economist Paul Niebanck reported that 29% of rent-controlled housing in the United States was in poor condition. Only 8% of rental units on the market were in poor condition. It’s common sense: in markets where rents are controlled, apartment owners cannot recoup maintenance costs. The result is deferred maintenance of anything not necessary for basic habitability.
Rent control is holding back the construction of rental housing. Oregon’s rent control law allows for a 7% annual rent increase and was designed not to hold back construction by exempting new homes for 15 years. Investment in new rental housing fell a further 38% after the law was passed. According to economist Block, investors are looking for safer investments with a better chance of return on investment, even if new units are not covered by rent control provisions.
Rent control has a negative impact on property values. A USC study found that rent control measures in St. Paul, Minnesota were driving down property values. Kenneth Ahern and Marco Giacoletti’s study found that property values in St. Paul fell by $1.6 billion or 6%.
Rent control increases rental costs for everyone. Cities in the United States with some form of rent control also have the highest rents in the country. New York is the highest, San Francisco, Oakland and Santa Monica are among the top 10 most expensive cities for renters (apartments.com, rent.com, Bloomberg and many others). Measure H would allow a review of the rent each time a dwelling becomes vacant. Like in Santa Monica, this reset means the new rate will be much higher so the landlord can recoup costs lost during the rent-controlled tenancy and hedge against increased costs in the future.
More worryingly, Measure H would create a government bureaucracy that would answer to no one. Measure H would establish an appointed council that can levy taxes on rental accommodation and use the revenue to pay its own staff. They can also afford more than $40,000 a year. There is no mechanism to remove members of this board. Worse still, there is no oversight from anyone, not the voters, not the city council or the city manager, not even the tenants. Lack of control and accountability is an invitation to corruption.
An unconstrained board of directors able to tax rental property owners as it sees fit, pay itself and employees as it sees fit without oversight, rising rents, falling property values properties, the deterioration of the rental housing stock and the decrease in the number of rental units available are all reasons to vote NO ON MEASURE H .
Measure H is not good for Pasadena. Not for our tenants. Not for our owners. And surely not for our mom and pop apartment owners who rely on that income to pay their own bills.
Please vote NO on measure H.
Paul Little is President and CEO of the Pasadena Chamber of Commerce and a former member of the Pasadena City Council.