By suppressing the supply of homes through restrictive zoning and other means, local government officials have done more than mostto plunge California into the current housing crisis. Proposition 10 would entrust another vast swath of housing policy to the very same officials—and probably yield similar results.
California’s housing shortage is often said to show that the state is a “victim of its own success,” namely its booming economy and employment. This analysis requires ignoring the state’s distinct failure to produce housing for the people who live and work here, which has saddled it with the fewest homes per personon the United States mainland. That, in turn, has led to superlative-defying increases in the cost of housing.
Rapidly rising rents are the most pernicious symptom of the shortage, contributing in the worst cases to evictions and homelessness. Stopping or slowing rent increases by fiat is therefore a viscerally appealing response. Enter Prop. 10, a November ballot initiative asking voters to lift California’s long-standing limits on local rent control laws, freeing San Francisco and other cities to extend price ceilings to more of their housing stock.
Prop. 10 would repeal the 1995 Costa-Hawkins Rental Housing Act, which protects properties built that year or later from rent control. The law also prevents cities with preexisting rent control laws from extending them to newer units; San Francisco’s ordinance, for example, remains limited to housing built before 1980. And Costa-Hawkins exempts single-family homes from rent control while guaranteeing property owners the right to raise rents to market value when units are vacated.
Do the Math
Much like trade barriers, rent control enjoys persistent political and popular appeal despite its nearly universal rejection by economists. Its benefits accrue to those renters who happen to occupy the controlled units, who become a devoted lobby for the policy, at the expense not only of property owners but also of other tenants. Most alarmingly for a state with a crushing housing deficit, rent control tends to reduce the quality and quantity of rental housing, the construction and maintenance of which is discouraged by price caps.
A Stanford University study of San Francisco’s 1994 expansion of rent control to small multifamily buildings found that it saved affected renters nearly $3 billion through 2012—and caused an equivalent loss to other tenants in the form of higher rents and lost housing. Moreover, the researchers found that landlords responded to added control by taking units off the market, reducing the supply by 15 percent.
Proponents of Prop. 10 argue correctly that the state’s many vulnerable renters need relief and protection much sooner than can be provided by any feasible level of market-rate construction. Proposition 1, the $4 billion affordable-housing bond also on the fall ballot, is one supply-enhancing means of doing so. Measures to prevent rent gouging statewide, and to require or encourage new construction to include affordable units, can also help.
But more rent control—and more local government control—will probably further suppress the supply of housing and deepen the crisis for the state. More housing is the way out of the housing shortage. Proposition 10 is not.