Real Estate Marketing & Beyond
Californian lawmakers last Wednesday approved a bill that, if it comes into effect, would lead to rents being capped throughout the state. The move has since drawn widespread criticism from real estate industry professionals who worry it could have a negative impact on renters in the long term.
The New York Times reports that many estate agents and economists have long argued against rent control measures, saying they have negative consequences such as discouraging investment and reducing supply, which hurts renters more in the long run. These arguments are backed up by a study in San Francisco and other cities that shows how price caps generally prompt landlords to abandon the rental business and sell their homes instead.
Now, following Wednesday’s move, the California Association of Realtors has moved quickly to voice its opposition to the bill.
"Throughout the debate, Realtors have advocated for a balanced solution that protected renters and respected the rights of property owners," Jared Martin, CAR president, said in a prepared statement. "While several of our recommendations were included in [Assembly Bill] 1482, including the exemption of single-family homes and condominiums, the final bill did not do enough to increase the supply of affordable rental housing. Even legislators who voted yes did so acknowledging its shortcomings."
The National Association of Realtors has its own policy on rent control as follows:
“Rent control negatively affects the housing inventory by hastening the deterioration and loss of existing housing. By lowering the value of rental property, rent control affects a community’s tax base by causing a disproportionate shift of tax burden to other real estate and potentially curtails vital municipal services. The expense of complying with rent control laws and regulations inevitably increases the cost of housing to the consumer, and the expense of enforcing rent controls adds to the cost of local government. Communities which have discouraged investment in new rental housing because of rent control should not be eligible for federally-assisted or state-assisted rental housing programs.”
But California Governor Gavin Newso has vowed to sign AB1482 into law. If he does, the law would limit annual rent increases across the state to 5% after taking into account inflation. Advocates say the rent control measures would assist as many as 8 million residents in the state who live in rented homes and apartments.
“Rent control is definitely having a moment across the country,” Jim Lapides, a vice president at the National Multifamily Housing Council, told the Times. “But we’re seeing folks turn to a really shortsighted policy that will end up making the very problem worse.”
At present very few states have some form of rent control in place, however. Maryland, New Jersey and New York are the others, but the Times reports that tenant groups across the nation are trying to implement such measures in other states. They have strong support in Colorado, Nevada and Washington. Meanwhile in Oregon, lawmakers there passed a statewide rent control bill last February that, if implemented, would limit increases to 7% annually plus inflation.
Proponents of rent control measures in California argue they are necessary due to an affordability squeeze. Some 55.3% of renters in the state paid 30% or more of their income on housing in 2017, compared to just 49.5% nationally, according to Census Bureau data. In addition, California is also struggling with a rental vacancy rate of just 3.2%, compared to 6.2% nationally. The state also has a growing homeless population.
“Although we did not prevail,” said CAR’s Martin, “we remain steadfast in our commitment to overcome California’s historic housing supply and affordability crisis. Much more work remains ahead of us.”
