Blog: Why Rent Control is Necessary, But Not Sufficient

Eli Moore

Program Manager

October 30, 2018

Do we have such a sense of scarcity here in California that we cannot imagine a housing sector growing with some modest limits on rental price increases? Apparently in the state with the highest GDP in the wealthiest country in the world, we somehow still have such limited capacity that we cannot achieve a comprehensive approach to housing that includes renter protections and increased housing supply.   

If the current debates around rent control in California were boiled down to a singular dialogue, they might sound something like this:

The rents are too high, tenants need rent control to
make housing more affordable.

Yes, the rents are too high, but rent control might make it 
harder to build more housing, exacerbating the shortage.

California has been failing to build enough housing for
many years, and eliminating the shortage will take many
more years. How long will renters have to wait for rents
to be affordable?

We don’t know, but that is the only way to solve the crisis.

How many low-income renters will be displaced or
become homeless in the meantime?

We don’t know, but that is the only way to solve the crisis.

There are over 9.5 million people paying more than they can afford to rent a home in California. The human effects are wide-ranging, from the child who has to keep changing schools when the rent goes up, to the "mega commutes" from lower cost suburbs to urban job centers, to the stress of not knowing if next month or the following month will mean getting thrown back out into the housing market. Or worsehomelessnesswhich is now more widespread in California than in any other state. Research shows a clear link between rising rents and increased homelessness.

It appears that all parties recognize the crisis, with even the real estate association decrying that the rent is too damn high. Irony is dead when landlords themselves are complaining about rents being too high. This apparent consensus on the problem turns to deep division when it comes to rent control as a policy.

One of the flashpoints on the November 6 election in California is Proposition 10, which will allow voters to decide whether to remove one of the legal barriers to rent control. The proposition, if passed, would repeal Costa Hawkins, a law that blocks cities, towns, and counties from adopting certain types of rent control protections. If proposition 10 passes, cities would be allowed to pass rent control laws that apply to all rental housing, whereas now they cannot protect tenants in single family homes or buildings constructed after 1994.

Although rent control is the only policy that would provide immediate stability and protection for renters, it has been dismissed because it would limit some of the profits landlords receive from rent. The California constitution guarantees that no law can prevent landlords from earning a fair return on their investment, so the debate is about how large the rental profits should be. Critics of the proposition argue that if rent control policies are in place, developers will stop building new housing and landlords will evict tenants and sell off their propertiesthe profits just won’t be enough for landlords.

Rather than adopt rent control policies, some argue that California should just focus on building more housing. California needs more housing, a LOT more housing. The state currently has an affordable housing gap of 1.5 million homes for extremely low- and very low-income households, and overall, it needs to build 3.5 million new homes by 2025 to accommodate current demand, pent-up or latent demand, and projected population growth. If construction continues at the same pace since 2000 (an average of 1 percent each year), California will only build approximately 1.2 million homes by 2025—less than 35 percent of the total estimated need. No studies have estimated how long it will take to fill the gap, or the likelihood that California will be able to pull this off.

Telling California renters that they cannot have the possibility of expanding rent control protections is telling millions of people to continue to endure the profound effects of the housing instability and poverty until some undefined time in the future when housing production might start to stabilize rents. We cannot afford to stand back and hope that new housing “catches up” to demand and “trickles down” to create enough affordable housing. There is a general consensus among researchers that rent control allows existing tenants to stay in their homes longer and benefit from greater affordability.  

If we are to truly find a comprehensive approach to housing affordability in California, “necessary but not sufficient” should be the catch phrase for all of us. Rent control is necessary but not sufficient on its own. Increased production of housing is necessary but not sufficient. If all sides could recognize the limits of each policy approach, Californians would be much closer to a comprehensive solution to the housing affordability crisis.

Editor's note: The ideas expressed in this blog post are not necessarily those of the Haas Institute or UC Berkeley, but belong to the author.