Roots of the Housing Crisis

California is in a state of emergency. Unchecked rent increases and unjust evictions are putting people into the streets. Skyrocketing rents are described as an unfortunate but unfixable in the near-term, and that the only solution is to deregulate building construction to add market supply. This is Reaganomics for housing policy, a supply-side theory that has failed and will fail to house the majority of us, but will line the pockets of landlords and developers. There IS an alternative.

The real-estate and landlord industries characterize the protection of existing residents through rent control or the development of new housing supply as an either/or proposition. This is a false choice. Rent control is effective at keeping people in their homes. It can be pursued alongside any number of policies regarding housing supply. We propose an alternative: keep people in their homes now, push for long-term policies to bring down the costs of land and housing, and build the low-income housing supply we need.

Why are rents rising? An analysis by Zumper isolated venture capital as having the most direct effect on rising rents. It makes sense landlords would try to make as much money as they can by evicting tenants and gouging rent when there is an astronomical amount of money in a community. We’ve seen it happen across the country, from North Dakota to Silicon Valley. As well, international capital is also flowing in to big cities globally, as the wealthy park their money in real-estate investments. Rents are rising because homes are being treated as commodities for profit, not dwellings for people. The speculation on land and housing is driving our housing crisis.

Supply-side economics does not fully explain the crisis. A focus on “just build” ignores our recent history. In California, we had a construction boom in the 2000s. Banks pushed sub-prime mortgages onto people of color and working class communities, then later foreclosed on those homes and those assets. We let a firesale to banks and investment companies happen, rather than cities themselves investing in infrastructure for affordable homes. Now the biggest owner of single-family home rentals in California is not mom-and-pop landlords but corporations like Blackstone-Invitation Homes, Colony Financial, and Waypoint Homes. We have been building, but communities haven’t had control over what we build, who we build for, and who profits off building. Low-income communities of color have been disproportionately impacted by this imbalance of power.

This transfer of wealth from tenants and homeowners to big corporations comes after decades of federal divestment from affordable housing. Section 8 vouchers replaced public housing, pushing public subsidies into the private market. These subsidies have been slashed by millions over the years and now Section 8 can barely keep up to market rents, with eligible tenants on endless waiting lists. Landlords regularly discriminate against Section 8 tenants, and the program has largely been a failure at giving low-income tenants greater choice of where to live.

As the government gets out of the housing business, corporations have stepped in. The main architects for pushing market supply-side economics as the solution to the housing crisis in our state is the California Apartment Association (CAA), which regularly mischaracterizes rent control because they have a profit motive to undermine tenant protections and conduct their business without regulations on rents and evictions. Likewise, the California Association of Realtors has led efforts to weaken tenant protections all as part of their effort to maximize property values and their commissions.

A supply-side economics solution is unproven and simply adds to the coffers of corporate landlords without addressing displacement. In May of 2016, the Urban Displacement Project through UC Berkeley and UCLA examined the trickle-down housing claim that producing more market rate housing would eventually produce affordable homes as those units age and new units are built, also known as “filtering,” and found nothing to substantiate this claim.

The rental housing bubble will eventually burst, but our greatest asset will be gone: people. Cities are bleeding out the diversity of residents that live in them now and contribute to the culture, art, music, and vibrancy that has drawn business and jobs here. We need solutions right now to keep people in their homes, and rent control and just cause policies are the best way to stem the tide of gentrification and displacement that is ripping apart the social fabric of California.

Rent control will slow evictions that threaten to unravel our society. The price of eviction is paid in the health of tenants, disproportionately black and brown families with children who are regularly uprooted from their homes. The Alameda County Public Health Department declared the high cost of housing to be a public health crisis. Stabilizing rents will provide a window to plan, build affordable homes, and reinvest in public infrastructure.

Pursue a host of affordable housing supply solutions. Inclusionary zoning is an effective way for developers and communities to meet some needs, but this is not a complete way to catch up on the lack of deeply affordable housing supply. The crisis has deepened as the federal government has divested from housing. There is no new public housing being built. Funding for the new construction of non-profit affordable housing has been gutted. Housing should be considered public infrastructure and historically one of the best market interventions has been heavy public investment.

No one who advocates for rent control believes it to be a silver bullet to the housing crisis, but it is a lifeline for our communities. The most vulnerable populations: seniors and disabled people on fixed incomes, young people, and communities of color, benefit from rent control because they are the most affected by rent gouging and evictions by speculators. Those who do not support rent control and only support adding market-rate supply do not value those that already live here and the most vulnerable among us.

Rent control is just part of the solution to the housing crisis, but we will never solve the crisis without it.

Click here to download our toolkit: Communities Thrive with Rent Control