Rent control, minimum wage are duct tape solutions that don’t work in the long term. It has broader implication on the general citizenry who are beyond the contract between renter and landlord.
It may be suitable for some institutions like university housing or sec 8 homes or govt built homes, but a blanket rent control for the whole state is alarming and should raise concerns about how the state is managing our tax dollars.
When the state starts interfering with rights of private property holders, that’s like breaking the legs of capitalism. It is a symptom of something else simmering and hidden.
Housing costs should adjust itself automatically to cost of living. It should be a well oiled machine where changes on end effects changes on the other and everywhere in between.
It doesn’t matter anymore if you are in California. After AB 1482 passed, the entire state of California is under rent control and building not older than 15 years is exempt. And that’s on a rolling basis. This kicked in 2019.
Obviously I didn’t mean that any single renter is responsible but the ways of said FAANG companies and their deals with the govt and the deals they make is troubling.
Expanded in points..please skip if you don’t want to delve into rabbithole :
1. It is incorrect that high density and building more will solve the issue of housing or affordability of it.
2. Infrastructure has to be improved before building. And it never gets done. Building costs are a pittance compared to capital expenditure and cost of infrastructure.
3. When Google comes in and says they will give money for affordable homes, what does it mean? They are making a fixed resource even more dear. And that is land. It is a kind of pay off because the thug(govt here) sees a well heeled traveler walking alone and decides to mug him.
4. You’d think that all the money new higher paying jobs will help improve infrastructure. But no. In the Bay Area, even during covid, they are not just charging tolls to go from one end of 880 and 680 but adding new toll roads.
5. The bloat in Sacramento is insane. They have sunk the California ship. And all tech companies are complicit. The govt should work FOR them and not the other way around. And they end up making unholy deals that affect people who are obviously not all employed by said tech companies.
6. On the flip side, they shouldn’t be in on the receiving end either ...Twitter..not decidedly a FAANG, but in the club.. is now lauded for getting out of SF due to covid and decentralizing it’s work force. Remote forever! The ‘Twitter Tax Break’ that saved companies millions of dollars for stock option sale and payroll tax breaks ended after a 8 year run on May 2019.
7. Let’s take the employees. Are they children walking down to school? It’s insane that grown men and women insist on living where they work. And in San Francisco too. This is why public transport exists. Building more isn’t a solution. I have lived in many parts of the world. Never have I seen such a coddled workforce that everyone considers so infantile that they can’t take care of themselves or their adult responsibilities.
8. The govt is playing a game not providing citizens with a basic infrastructure while blaming everyone else not involved in this mess.
9. So who pays? The citizenry who have/had invested in living in California cities, of course. It’s constant blood letting sessions for more taxes. And everything is for ‘affordable housing’. It’s a buzzword that relies on the empathy of any normal human being but aims to be a fuzzy term for state sponsored thuggery. Example below.
10. Apartment complex with 350 units ranging from 800k-1.2 million and legally required to set aside 10% affordable homes. Of course builders dont want to do that and they pay In-Lieu fees. This works for the govt because market rate homes pay more property taxes than affordable homes. And this is built into the cost of housing making it more affordable. Every increase in housing costs goes towards higher property taxes which goes who knows where because it’s not going to infrastructure.
11. In the same example, the builder also paid for a new school and the cost of the roads and money to Water Dept. All the while, the cost of living keeps multiplying exponentially as population increases. Making cities more and more unaffordable.
12. Meanwhile open spaces and non residential city lots are being auctioned off to builders. High density cities have no ingress/egress during fires etc(we experienced it this year and also in the past few years during fire season) and the law enforcement numbers doesn’t increase as much as the number of people, but crime increases. Homes multiply, but schools don’t.
Rent control is insanely complicated and differs from county to county...and city to city. Housing policies, rental control and transport are all connected in California.
The powers that be in CA have been constantly creating maze like regulations that seem to have two goals: 1. Increase property taxes 2. Avoid building a well networked public transport system.
The state is very invested in new buildings. But that begs the question: who bears the cost?
72 pages of the study paper: http://conference.nber.org/confer//2017/PEf17/Diamond_McQuad... :
[..] “The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality: Evidence from San Francisco,” Diamond and McQuade used public and private data to look at how often people moved out of rent-control units, how often landlords converted those units to new types of housing not covered under rent control, and how median rents changed since the 1990s.
The pair singled out SF specifically to “exploit a unique rent control expansion in San Francisco in 1994 that suddenly provided rent control protections for small multifamily housing built prior to 1980” so that renters in post-1980 homes form a natural control group with which to compare.
Here are some of their conclusions:
Rent controlled tenants are of course more likely to stay in their current homes. “Rent control increased the probability a renter stayed at their address by close to 20 percent,” note Diamond and McQuade, with younger renters more likely to leave the roost anyway than older ones.
And that in turn prevents flight from San Francisco itself. “We find that absent rent control essentially all of those incentivized to stay in their apartments would have otherwise moved out of San Francisco,” note the economists. Yikes.
However, in some the priciest neighborhoods, tenant turnover in rent-controlled apartments was actually higher. “This evidence suggests that landlords actively try to remove their tenants in those areas where the reward for resetting to market rents is greatest,” either by gamely buying out long term tenants or just evicting them.
Landlords of rent-controlled homes were more likely to convert them to the types of buildings not covered by the provisions. “Landlords whose properties were exogenously covered by rent control reduced their supply of available rental housing by 15 percent.”
Particularly via the old TIC trick. “Rent-controlled buildings were almost 10 percent more likely to convert to a condo or a Tenancy in Common (TIC) than buildings in the control group, representing a substantial reduction in the supply of rental housing.”
Even so, rent control is definitely good for the tenants who get it, even with the added risk of landlord shenanigans. “Rent control offered large benefits to impacted tenants during the 1995-2012 period, averaging between $2,300 and $6,600 per person each year, with aggregate benefits totaling over $390 million annually.”
But the loss of housing might drive up rents elsewhere. “We find that six percent decrease in housing supply led to seven percent increase in rental prices. These caused an aggregate welfare loss to renters of $5 Billion. This is almost as large as the benefits accrued by the lucky beneficiaries of rent control.”[..]
Is there a solution? I don’t know. Here is mine. The govt should build high density rent control apartments that families can rent on 99 year leases. This housing stock can have transfer rights making a mobile workforce move with the job. It makes housing stable as well infrastructure robust. It’s not a Red Queen situation or a drunken goat rodeo where chaos reign.