UC Berkeley researchers boost rent control

Earlier this month, UC Berkeley economist and real estate consultant Ken Rosen came out against Proposition 10, the November ballot initiative that would repeal the 1995 Costa-Hawkins Rental Housing Act and allow California cities to expand rent control.

Two weeks later, UC Berkeley’s Haas Institute released a policy brief promoting the benefits of rent control for tenants and pushing back on some of Rosen’s criticisms of price regulation.

Though the publication—titled “Opening the Door For Rent Control” and issued by Haas researcher Nicole Montojo (who holds a master’s degree in city planning from Berkeley)—does not directly address Proposition 10, the timing of its release is significant in light of the upcoming election.

“California has reached a tipping point where policies and the private market are failing to meet the needs of the majority of renters,” Montojo et al. write, arguing that low-income people and communities of color are bearing the brunt of the housing crisis and that cities have an obligation to step in and help.

A few of the arguments they employ:

• Haas researchers argue that a supply-side housing solution will take too long: “The state currently has an affordable housing gap of 1.5 million homes for extremely low- and very low-income households. [...] It needs to build 3.5 million new homes by 2025 to accommodate current demand, pent-up or latent demand, and projected population growth.”
• Rent control offers relief to renters in the short term: “Where most other programs require tremendous financial resources and take a great deal of time, renter protections can be established as a matter of law and the administration of rent control is typically paid for through modest per-unit fees.”
• And it targets relief on current tenants: “The vast majority of academic studies on rent stabilization find that it increases renters’ ability to choose to remain in their homes. A recent study of the effects of rent control in San Francisco found that it increased tenants’ probability of staying in their homes by nearly 20 percent.” Note that the cited source on that claim is the recent Stanford study, to which anti-rent control campaigners often refer, but also from which they draw different conclusions.
• The current system favors landlords arbitrarily: “The rental housing market in California is broken; windfall profits are being made in large part due to forces that have nothing to do with the investments or actions of property owners.”

Photo by Louis Cuthbert

• In fact, the brief argues that public spending effectively subsidizes landlords: “As anyone who has looked for housing knows, neighborhood conditions around a home are often as much a factor as the building itself. [...] Yet these improvements are largely a result of public action, such as increased public funding, new regulations, smart planning. [...] Regulation of land value simply recaptures value created by the public.”
• Montojo et al. are also critical of ideas like means testing: “A common critique of rent control is that it is not means-tested, and thus does not specifically target the renters that need it most. [...] Means-testing would very likely lead to discrimination against low-income renters because landlords would be incentivized to evict eligible tenants or solely rent to non-qualifying tenants who could pay higher rents.”
• And they point out that construction continues even in the face of rent control: “The three largest Bay Area cities with rent control (San Francisco, San Jose, and Oakland) have only 27 percent of the region’s housing but according to the U.S. Census Bureau those cities have built 43 percent of the Bay Area’s new multifamily rental units in buildings with five or more units since 2000.

A likely rejoinder to the latter point is that construction grows because new homes are not subject to rent control, which they might be if Proposition 10 passes—but only if cities decide to do so specifically.

Also of note: The brief does not address the upcoming election, only the general question of whether rent control benefits communities.

Montojo and colleagues do concede some potential negative impacts of rent control, such as depressing property taxes. But they argue that it’s a question of “trade-offs,” concluding that “inflicting enormous hardship on tenants [...] is too high a price to pay for generating more tax revenue.”

You can read the full brief here.

• Opening the Door To Rent Control [Haas]
• Comprehensive Approach To Protecting Renters [Haas]
• Stanford Study Says Rent Control Drives Rents [Curbed SF]
• UC Berkeley Professor Blames Rent Control [Curbed SF]