Living in Orange County has rarely been more expensive. Rents in Orange County (OC) are up 28% in five years, just below the average 32% increase in home prices over the same time. Meanwhile, the wage increases required to pay for these rent increases fall far short, as incomes have increased at half the pace of rents, rising about 15% in five years.

Real estate agents survive and thrive when renters consistently transition to homeownership. But with high rents and slow income growth, how is a renter to save up for a needed down payment?

Even with a low-down payment FHA-insured mortgage, a 3.5% down payment for an average home in OC is at least $23,000 — more than the average cost of renting for one year in OC. Thus, high rents often preclude renters from homeownership.

Much like the rest of urban California, OC’s burgeoning housing crisis is caused by low supply, high demand and skyrocketing home prices. This is bad for sales and for long-term residents forced to rent or purchase in far-flung suburbs.

One common way to quell the rise in rents is to enact rent control. However, OC is especially averse to rent control measures. Further, there is the question of whether rent control does anything to address the structural issues related to the rental housing crisis.

Editor’s note — San Juan Capistrano is the only city in OC with some form of rent control and it only applies to price increases at mobilehome parks, primarily aimed at protecting senior citizens (San Juan Capistrano’s senior citizen population is 4% higher than the rest of OC).

Elsewhere in OC, Lake Forest residents petitioned for rent control on mobilehomes in 2014 but were denied. The Huntington Beach charter outright bans rent control in any form.

Rent control (for buildings other than mobilehomes) has been enacted in five Southern California cities — Los Angeles, Santa Monica, Beverly Hills, Palm Springs, and West Hollywood — none in OC.

Rent control misses the big picture

In OC, much like in the Bay Area, rent control can only be a short-term solution to address the governmental failure to foresee and zone for today’s rapidly worsening housing shortage. Yet, even with today’s low housing supply, the political pressure to implement some form of rent control is practically nonexistent.

Ultimately, rent control is a negative economic solution, as it weakens growth by:

  • forestalling natural and gradual gentrification which can raise property values;
  • perpetuating the balkanization of “rich” versus “poor” neighborhoods;
  • reducing fertile turnover of residential and business occupancies; and
  • removing the motivation for construction, limiting rental supply and increasing rents for non-rent-controlled projects.

As a consequence, rent control is a political inversion of the landlord/tenant relationship. The landlord of a rent-controlled apartment:

  • is constantly hoping their tenant will move out to leverage increased rents (even though the tenant who remains avoids the expenses of turnover and vacancy); and
  • has less incentive to properly maintain their property since their net operating income can only be increased by reduced operating costs, not increased rental income.

In the end, the only way to boost supply and meet the abundant demand for housing is to implement inclusive zoning changes to accommodate OC’s thriving population. This will organically keep demand in check and cure the supply crisis. Denser, taller buildings with fewer parking requirements are needed to help builders increase the housing supply.

Meanwhile, the state government is slow to enact preemptive, statewide zoning mandates. Thus, it is left to the local governments and the few, vocal residents who attend city council meetings where zoning decisions are often made.