For the third time in six years, California voters will decide in November whether to grant cities and counties more power to regulate rents.
Proposition 33 would repeal a 1995 law that curbs locals’ ability to cap rents, known as the Costa-Hawkins Rental Housing Act. The law prohibits cities and counties from imposing rent control on all single-family homes, condos and apartments built after 1995 and ensures landlords can bring rents up to market rate when a new tenant moves in.
Proposition 33 would do away with those provisions, allowing cities and counties to adopt local rules that control rents on all types of properties and for new tenants. It would also bar the state from passing any new laws limiting local rent control.
Voters twice rejected similar initiatives that would have gutted Costa-Hawkins, but rent control has become increasingly popular with advocates and political leaders as they struggle to rein in housing costs. The policy is also gaining traction nationally, with President Joe Biden and Vice President Kamala Harris embracing the cause.
Rent control in the wild
More recent research into the real-world impacts of rent control describes a nuanced picture as it relates to rental prices, the stock of rental housing, and its impacts on tenants.
In one study from 2019, researchers took advantage of a natural experiment by examining the effects of a 1994 ballot measure that expanded rent control to small, multi-family properties in San Francisco that the city’s rent control laws hadn’t previously covered.
It found tenants in controlled units were 20% more likely to stay in those apartments compared to people who didn’t have access to rent control, and “the vast majority of those incentivized to remain in their rent-controlled apartment would have been displaced from San Francisco had they not been covered.” That was especially true for renters of color.
That finding seemed to bolster advocates’ claims that rent control is effective at stemming displacement. But, the research also pointed to evidence that bolstered opponents’ claims.
It found that landlords responded to the policy by converting their properties to condos, selling them or redeveloping. Over time, that led to a 15% drop in rental housing in the city and a shift toward buildings that cater to higher-income residents. As the traditional economists had predicted, it drove up costs for people who weren’t already in rent-controlled apartments.
However, Rutgers economist Mark Paul, who supports rent control, argues policymakers could prevent this reduction in rental housing stock by pairing rent caps with other regulations that mitigate such unintended consequences.
“For me, the evidence is quite clear that rent control can be tremendously beneficial,” he said.
Extreme vs. moderate
Paul and some other modern economists argue that the trick to rent control is balancing landlords’ needs with those of tenants while taking other steps to address the housing shortage, like building a lot more affordable apartments.
“Any policy, you can design a helpful version of it, or you can design a potentially harmful version of it,” he said. “We can design smart rent control policies to deliver both affordability and stability for renters while also maintaining a healthy market for people to continue building.”
To stop landlords from shirking maintenance, for instance, Paul said they should be allowed to pass on the costs of improvements to renters. Policymakers can do that by allowing rent increases above the rent control threshold in some cases so property owners can recover their investments.
To prevent landlords from converting their apartments to condos, Paul said lawmakers can put rules in place limiting those conversions. He also argues for policies that hold rents down not just for existing tenants but also for new tenants, a controversial provision referred to as vacancy control…
Even Paul, a proponent of rent control, said the policy “is not a silver bullet.”
Instead, he argues for rent control as one useful tool among the many we must piece together to tackle a housing crisis as dire as California’s.
“The truth is that no single solution is going to be enough to fix the huge hole that we find ourselves in here today,” he said.