Is this political hot topic hurting or helping the industry?
As of today, five states (California, Oregon, New York, New Jersey, and Maryland) and the District of Columbia have localities in which some form of residential rent control is in effect (for normal structures, excluding mobile homes) and it could be coming to a jurisdiction near you. Rent control feels and sounds good, but it ends up hurting those that it claims to be helping the most.
I think most property owners and managers appreciate their tenants and want to take reasonable care of them. However, the media as well as some special interest groups like to portray landlords as evil people that are greedy and take advantage of their tenants. I have read many studies about New York, Santa Monica, Berkeley, and San Francisco that show rent control actually hurts tenants.
According to an August 24, 2018, study out of Stanford University by Rebecca Diamond, Tim McQuade and Franklin Qian, rent control in San Francisco hurt tenants in the following ways: rent control limits renter mobility by approximately 20 percent and “lowers displacement from San Francisco, especially for minorities.” Rent control was credited to reducing the rental housing market by approximately 15 percent due to owners converting their rental stock to condos/TICs, selling to owner occupants, or redeveloping their residential apartments/rentals into another use; they found that “[…] rent control increased gentrification of San Francisco, as the endogenous changes in the housing supply attracted higher income residents, undermining the goals of rent control.”
Recent research shows that rent control policies can reduce property values between 10-35 percent. This value reduction hurts states, like California that collects property taxes on the value of the property at time of purchase with the ability to increase property taxes by only two percent per year. This would adversely affect government services like police, fire, and education. In addition to hurting values, rent control hurts the overall supply of available rental units. If we are to solve the affordable housing crisis, we need more housing, not less.
Not only does rent control hurt property values in a 2016 report, the Legislative Analyst’s Office in Sacramento, CA found that rent control does not help affordability and in fact, makes rental housing more expensive. During the 2018 election cycle, California had at least two ballot measures that were about rent control. One was a statewide measure and one was in National City, a small city in San Diego County. Those of us involved in the fight found that the words “rent control” play well to a large audience as they feel warm and fuzzy. As a result, trying to defeat words that feel good was a real challenge. On both the state and local level we had to figure out a way to brand our messaging without using the words “rent control.” Fortunately, we were successful in California defeating rent control this election cycle. (Editor’s Note: In September, lawmakers in California approved Assembly Bill 1482, which the Governor has stated he would sign, that would limit annual rent increases throughout the state to five percent after inflation.) In National City renters make up approximately 70 percent of the entire population of the city. There was no surprise Measure W (a Rent Control law) polled extremely high before the Realtors and Apartment Owners Association got heavily involved.
The August 2018 polling data showed that approximately 65 percent were in favor of Measure W, 29 percent were against and seven percent were undecided. In October, we had moved the polling needle to 44 percent of the people in favor, 37 percent against with 18 percent undecided. The Yes on Measure W started their campaign around this time. The results were that 46.10 percent of the voters voted Yes, and 53.9 percent voted No! The No on Measure W campaign spent more than $600,000 in a city where only 6,117 people voted and there is a population of 60,349.
Proposition 10 was a California statewide proposition that would allow for rent control to return to California. Tens of millions of dollars were spent on both sides of this campaign before the proposition was defeated. In the Proposition 10 election, 636,659 people voted, and the proposition was defeated 64.29 percent to 35.71 percent.
I have been deeply involved in California politics for many years now. This was the worst election cycle I have seen in my 20 years of involvement for property owners. Studies on rent control show that it especially hurts poor minorities in some of the most expensive rental markets in the U.S. such as New York, Berkeley, CA, San Francisco, and Washington DC. We need your support to help fight continued efforts by misguided or ill-informed special interest groups that want to ram rent control down our throats.
In March, Oregon became the first state to impose statewide rent controls. Oregon’s law limits rent increases to seven percent above the CPI, with Gov. Brown saying that this won’t be the state’s only step toward addressing the problem of affordable housing. Some ‘for-cause’ evictions are allowed, but landlords have to give 90-day notice to terminate tenancy and pay the tenant one month’s rent, although landlords with four or fewer units are exempt from the payment.
As you can see, rent control will continue to be a hot political issue. Please consider giving to the NARPM PAC and or go to the 2020 NARPM Legislative Conference so we can continue to fight for private property ownership rights and our industry.