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The Mirage of Rent Control RENT CONTROL (N) - regulation by law of the rent a landlord can charge for domestic accommodation and of his right to evict tenants. I n California, only 32 percent of families can afford a median-priced home. In Santa Clara, Santa Barbara, and San Francisco, prices have increased to the point that fewer than 20 percent of buyers seeking to purchase a home as their residence can afford to do so. It’s fair to say that California is the most challenging place in America to buy or rent a home. Soaring home prices have increased demand for rental housing, but California’s rental housing market is also experiencing a severe lack of supply. California currently has a 30- year low rental vacancy rate of 3.6 percent, and, as a result, California’s average rent is approximately 50 percent higher than the rest of the country. The lowest income renters across the state are spending approximately 68 percent of their income on rent. For context, renters paying more than 30 percent of their income on housing are considered to be “cost-burdened.” The over- arching problem is rooted in the simple economics of supply and demand. California does not have an adequate supply of hous- ing, which drives home prices and rents beyond people’s reach. Rent Control Is a Mirage The housing supply crisis has fueled calls for stronger protections, including rent control policies, for low-income renters. The problem is that research consistently demonstrates that mandating artifi cial prices for rental units reduces the supply of rental properties and creates an economic disadvantage for low-income families most in need of an affordable home. These are among the reasons why rent control has been outlawed in 27 states across America. Despite the risks, more than a dozen California cities currently have rent control policies in place. However, the policy has not had a positive impact on housing affordability. While these policies may provide some relief for a small number of renters, research has demonstrated that rent control has a longer-term impact on the quality of life for families in four key ways: • • • • Top Producing Team Gilroy Offi ce, 2015, 2016, 2017 Sean Dinsmore, Realtor Intero Real Estate Services 408.710.2855 DRE #01966405 Marta Maloney, Realtor GRI Intero Real Estate Services 408.710.0571 DRE #01352339 Reduces existing and future supply of rental housing. Hurts low-income households. Deteriorates quality of rental housing. Increases costs for all renters. When they can’t earn a fair market price, investors have a greater incentive to put their money in other types of property, which reduces the supply of rental properties. Investors who already own rental property are also likely to respond by converting buildings from residential to nonresidential use to earn fair market value, which takes more rental property out of stock. Supply is also impacted due to low turnover. Rent controlled units are attractive to tenants, so, once they get into a controlled property, they are less likely to move regardless of whether they can afford to rent or buy a market-rate property. This lowers turnover and limits the supply of affordable rental housing for those most in need. Discrimination Against Low-Income Families The negative effects of rent control are felt disproportionately by low-income people. First, not all rent-controlled units are preserved for low-income tenants or “means tested.” Second, in an impacted market, the Legislative Analyst’s Offi ce points out that landlords are likely to exert more discretion regarding whom they rent to, and factors including income and credit history can become even greater decision factors which can further bias the selection process against low-income families. Continued on page 23 GILROY • MORGAN HILL • SAN MARTIN december 2018-january 2019 9