To say there isn’t enough housing for low-income households in California is kind of like saying the Titanic took on some water. The lack of affordable rentals has become a statewide crisis, at its worst in expensive coastal cities like Los Angeles and San Francisco.
For example, the median-income household in Los Angeles spends 46% of their monthly income on rent alone, high above the recommended 31% rent ceiling. Since it’s financially unfeasible for most households to spend almost half of their income on rent, the resulting options are to:
- move in with roommates or family members;
- become homeless (which a staggering number have done in recent years); or
- find some sort of subsidized or controlled rental solution.
However, most housing experts believe one of these most commonly used solutions — rent control — causes more harm than good. In fact, only 2% of housing experts believe rent control is an effective solution to a lack of low-income housing in a normal housing market.
Here in California, the following cities have rent control laws:
- Beverly Hills;
- East Palo Alto;
- Los Angeles;
- Los Gatos;
- Palm Springs;
- San Francisco;
- San Jose;
- Santa Monica;
- Thousand Oaks; and
- West Hollywood.
Specific rent control laws vary by city. Some cities only limit increases in rent (usually to about the rate of inflation) and others also restrict the reasons for which a tenant may be evicted.
Rent control is meant to keep rents on certain units from rising beyond the financial abilities of long-term tenants. This is especially important here in California, where housing cost increases regularly exceed income increases. In theory, this creates more stable neighborhoods since tenants won’t be forced out in the face of gentrification.
So why do housing experts say that rent control doesn’t work?
There are several disadvantages to rent control. Unlike with a traditional rental, where a landlord attracts tenants by properly maintaining the unit and can charge more rent when they improve the property, this system gives very little incentive to landlords to maintain and improve properties.
Worse, rent control encourages landlords to push out tenants whenever possible, since they are able to collect higher rents whenever a new tenant moves in due to a controversial workaround produced by Costa Hawkins.
Editor’s note — Proposition 10 appeared on the 2018 ballot to repeal Costa Hawkins, the law which resets rent-controlled apartments to market rate whenever a tenant moves out. However, this effort was unsuccessful, and Costa Hawkins remains in effect.
Rent control places tenants and landlords in adversarial roles. It also causes decreased property values, as landlords or impacted units have little to no incentive to maintain their properties and see their rentals become outdated and dilapidated. Due to decreased values, the benefits of building more rental housing in a city with rent control are considerably lower (even though rent control laws do not apply to new construction), which compounds the issue of not enough rental housing and skyrocketing rents.
Better than rent control
Clearly, rent control is not perfect. But is there a better solution that allows low-income renters to qualify to pay rent, while also keeping landlords happy?
Yes, and it’s really simple — more construction of low-income housing is needed across California, and especially in its coastal cities.
There are already 1.5 million fewer homes than needed to keep up with the population of low-income residents in the affordable housing inventory, according to the Low Income Housing Coalition. Every year, this number grows as the increasing population exceeds new residential construction of all types.
To fight this severe housing shortage, local governments need to encourage the building of more housing suitable for low-income households. This can be done through builder incentives and re-zoning to allow denser building near jobs and public transit. However, such efforts often receive the support of legislators, but end up being derailed by local not-in-my-backyard (NIMBY) advocates. For a recent example, see SB 50, a promising bill to provide more housing near public transit which has been delayed due to NIMBY interference, citing the bill’s potential to change the “character” of their neighborhoods.
When sufficient rental housing exists to shelter the state’s low-income population, the need for rent control will diminish.
Read about California’s numerous efforts to encourage more affordable housing here.