Weber Avenue Welcome Sign, Stockton California
Stockton, CA Not-for-Profit, Matthew Davies Consulting Offers Three Alternatives to Rent Control
The state of California has long grappled with housing affordability. With an average median home price upwards of $600,000, California housing is among the most expensive in the country. According to one study from the California Department of Housing and Community Development, in every major metropolitan area and its surrounding counties, between 30 and 60 percent of residents cannot afford market rent. Homelessness rates are at an all-time high and made worse by the impact that the COVID-19 pandemic has had on joblessness, wage reductions, and missed work due to illness. This issue is so close to my heart that I’ve formed the consulting arm, Matthew Davies Consulting, based in Stockton, California to help municipalities address this issue using unsubsidized options. I’ve outlined several of these options in this article.
The state of California has tried to solve the affordable housing problem at the government level for several decades, from rent control policies dating back as early as World War II to the current governor’s passage of eighteen bills aimed at increasing housing production. But the problem remains, demonstrating that alternative solutions are needed.
Fortunately, there are alternatives to rent control that are much better suited to addressing the affordable housing crisis in California and across the country. Some of these alternatives aim to increase the supply of unsubsidized affordable housing by lessening the constraints on developers. When government subsidies are needed, rental assistance is preferred to rent control. I’ll discuss these solutions in more detail. But first, let’s examine the problems with rent control.
Rent Control’s Unintended Consequences
Rent Control is a type of government-mandated price control that caps the frequency and amount by which landlords and property owners can increase the rent in residential units. At first glance, rent control seems like a viable solution to making rent more affordable, but such mandates usually cause more problems than solutions, for several reasons.
First, when a state, city or county government adopts rent control, the regulation is applied to everyone, regardless of whether they need it or not. The result is that in rent-controlled communities, everyone — even those who can easily afford market rent — receives a subsidy that is paid for by the government, the property owner, or some combination of the two.
Second, rent control costs local governments huge sums of money, and not just for subsidizing the properties themselves. Governments also must pay to implement and administer rent control, defend it in court, manage compliance, and more. Local government budgets are finite and spending those budgets defending rent control actions in court leaves less money for infrastructure maintenance, hiring first responders, and other essential programs.
An unintended consequence of rent control often ensues when park owners who find themselves financially frustrated decide to shut their parks down, displacing thousands of residents in need of affordable housing, slashing the supply of affordable homes in the area, and ultimately driving up the price of remaining as the remaining supply cannot meet the current demand.
Finally, rent control can have a significant impact on the maintenance of mobile home parks. Reducing the funds available for maintenance and community improvements can lead to park deterioration and even increased crime or, as stated previously, can cause property owners to close them altogether in pursuit of a more lucrative option, such as a commercial property.
Alternatives to Rent Control
Making homes more affordable requires that we increase the supply, building more affordable housing units where they are needed (closer to population centers whenever possible), and provide assistance to those who actually need it. Here are some suggestions for doing that:
1. To effectively increase the supply of affordable homes requires that we lessen the regulatory and legal hurdles that developers have to go through in order to build more affordable homes. This means more permissive zoning, less red tape, and greater densities.
2. By greater densities, I mean utilizing tiny homes or going vertical. A regular subdivision with site-built, single-family homes would require about an acre for every 4–5 homes. On the other hand, in a community of tiny homes, you can install up to 25 or even 30 residences per acre. Tiny homes are economical, practical, and can substantially assuage some of our shortage issues.
Utilizing high-rises, we could fit about 100 units on an acre of land. If we average three people per unit, that is up to 300 people per acre.
To increase our affordable housing options, we will need to get creative with how we use our available — and properly zoned — land to accommodate as many people as possible.
3. Rental assistance programs are government subsidies that target people based on need. Therefore, unlike rent control which imposes a ceiling mandate on rent prices, rental assistance is provided only to people who meet certain criteria.
Although these programs are costly, they offer a more tailored, targeted approach focused on helping only the neediest while forcing those who can afford the rent to pay market rates.
Conclusion
The California state legislature continues to grapple with affordable housing. Many of the solutions offered at the legislative level have historically been unsuccessful at increasing housing stocks. The solution to this problem lies in increasing housing supply, but further regulation and red tape will only serve to further constrain housing stocks rather than grow them, therefore driving up prices rather than keeping housing prices down.
It’s time for private citizens with backgrounds and experience in owning and operating affordable housing businesses to speak up and educate legislators on what options will effectively increase affordability and increase housing stocks. Reducing the number of regulatory loopholes that developers have to go through and focusing on rental subsidies for families who qualify is the greatest way that government can help solve the affordable housing crisis in California and other parts of the United States.
About the author:
Matthew Davies has long been an advocate for affordable housing in his state.
In 2009, Davies founded Harmony Communities, which currently owns and operates thirty-three manufactured housing communities in the western United States, with the goal of helping to bring the opportunity for homeownership to people in his home state who otherwise could not afford to buy a home.
Davies is now offering affordable housing consulting through Harmony Communities’ new not-for-profit arm, Matthew Davies Consulting. Based out of Stockton, Matthew Davies Consulting will be advising municipalities in how best to increase their affordable housing stock through unsubsidized options, which will increase housing stock in these counties but at no cost to the counties themselves.
