Housing shortage

Rent Control May Be Restricting Supply

Rent control seems like it’s a good thing in an environment in which rental prices and house prices are both skyrocketing throughout California. 60% of people support rent control according to a 2017 survey. We certainly need something to to make affordable housing available to more people. But is rent control the correct choice?

With it comes some unfortunate side effects. Homeowners impacted by rent control are not wanting to give up their rental income easily. If rent control prevents them making a profit of renting what they have, they turn to converting or redeveloping their buildings. This artificially inflates the rental value, as it’s a new structure and therefore the owner has justification to raise the rate despite rent control. So homeowners’ response to rent control is, effectively, to reduce the inventory of affordable housing. In addition, areas of mixed rent-controlled and non-rent-controlled units are wealth agnostic — the rent-controlled units don’t necessarily go to those in need of affordable housing.

So, attempting to make existing housing more affordable for renters hasn’t worked out. What’s the solution? Build more. The problem isn’t only lack of affordable housing. It’s also lack of housing in general. Building affordable housing solves both of these issues, and has the added advantage of not relying on a segment of the housing market that doesn’t enable upward mobility. It’s a difficult task, though, since California hasn’t updated its zoning laws for today’s market and they continue to favor single family residences over more affordable multifamily dwellings.

More: https://www.economist.com/united-states/2018/05/12/faced-with-a-housing-crisis-california-could-further-restrict-supply?fsrc=scn/tw/te/bl/ed/facedwithahousingcrisiscaliforniacouldfurtherrestrictsupplythewrongremedy

Leave a Reply