January 12, 2021
Government rent control policies are supposed to reduce rental costs and help lower-income Americans find housing they can afford. But a new Goldwater Institute report analyzing rent control in California cities shows that these policies haven’t made housing more affordable and, in fact, harm the very people rent control is intended to help.
In his new report Rent out of Control: Government Is Not the Answer to the Affordable Housing Problem, former Goldwater Institute policy analyst Trevor Bratton examines the difference in the rental unit supply in more than 100 California cities with and without rent control regulations between 2010 and 2018. With several diverse cities in close geographical proximity and with a range of rent control regulations, California provides a strong set of examples for comparison.
Bratton’s findings paint a picture of scarce supply and increasing unaffordability in many places. His research makes it clear that “rent control ultimately drives a market that favors certain renters over others, puts more power in the hands of landlords, appears to slow increases in rental unit supply, incentivizes landlords to convert controlled units to owner-occupied units, contributes to higher rents in uncontrolled units, and reduces landlord investment back into rent-controlled apartments.”
Modern rent control started in the U.S. around the time of World War II, when women and other workers began moving into cities to aid in the war effort. As demand for city living temporarily went up, so did the rent, leading cities to cap the amount a landlord could charge for rent. But the consequences of rent control actually made affordable housing less available to tenants, as millions of rental units were converted to owner-occupied units in response to these caps. With less housing available to renters, housing costs went up.
Ironically, in trying to reduce the cost of housing with rent controls, government is attempting to solve a problem it created by way of other regulations which have led to increased housing costs. In many places—like San Diego, for example—government imposes heavy regulations on property rights, by either prohibiting affordable housing (through the implementation of zoning laws that restrict density, for example), or by imposing permitting processes that make it expensive or cost-prohibitive to build. That overregulation is making it difficult for developers to construct new housing and keep pace with rapid upticks in demand in the Golden State. In San Francisco, for one, the housing supply is woefully inadequate, with about six new jobs currently being added in the city for every new housing unit constructed.
Instead of pursuing rent control policies, which don’t work, government should undo the bad policies it put into place that caused housing unaffordability in the first place. And there are indeed reforms that can fix the problems government has caused.
First, to increase the supply of housing in cities where it’s scarce, government must make it easier and quicker for builders to construct new housing units. The Goldwater Institute’s Permit Freedom Act is a great way to do that: It would require government to approve or deny permits within a defined timeframe, provide clear criteria for whether the permit will be granted or denied, and provide permit applicants with independent judicial review when their permits are denied.
Additionally, lawmakers must understand the damaging effects that property regulations can have. Another Goldwater Institute reform would help address that concern: The Property Ownership Fairness Act requires government pay property owners when it takes their property rights away. If a property regulation is too expensive for the government, then it should not be imposed on the property owner.