I recently wrote an article outlining the new rent control regulations in New York — and I think a lot of the points I made then apply here. The actual bills and details are different but the overall effects of rent control are the same, because at the end of the day this has nothing to do with landlords or improving lives.
First, let’s all accept there’s a housing crisis in California — the epicentre of which is LA.
Last year when visiting my partner in Los Angeles I was shocked to come face to face with the poverty that the 4th wealthiest city in the world offers. We were out one evening in downtown making our way to the next bar on our schedule. The streets were, I thought, surprisingly empty for a warm Friday night. As we turned the corner, my partner and her friends suddenly stopped. They looked at each other and without a word began walking the other way. I looked around as though the quiet streets might offer some answers, before I obligingly followed. They later explained that this was the invisible barrier to ‘skid row’, a roughly 50-block area in downtown Los Angeles that has become synonymous with homelessness and poverty.
With this said, we can all recognise that the affordable housing crisis needs addressing. Yet the knee jerk reaction from landlords whenever the words “rent control” are thrown into the ring is, inevitably, anger. They are running a business, not a charity, and rent control infringes on their profits. What this bill sets up, what rent control in general sets up is a two-sided debate which at best is unhelpful, and in my opinion completely misses the point.
Rent Control and Affordable Housing
The argument is that unregulated and uncontrolled rent leads to less affordable housing and fewer available properties which in turn contributes and exacerbates the housing crisis. However, correlation does not necessarily mean causation. This whole thing sounds a little like we are glossing over some pretty deep rooted and integral societal issues. Ignoring them and pinning all the blame on landlords.
If you look at the stats you can very quickly begin to see some major causes of homelessness which need addressing. “25% of Los Angeles homeless population suffers from serious mental illness, and 16% are physically disabled. Around 7% are US veterans, and a hugely disproportionate number are African Americans, making up over 30% of the homeless population, but only 8% of L.A.s total population.” With these stats in mind, I can think of a half dozen root causes, off the top of my head, that could be remedied for long term positive change.
The point here is that there are many reasons someone becomes homeless, or is unable to afford their rent. Affordable housing is certainly part of the solution, it is not however, the main or only cause.
Most of the bills have died (killed at great expense by big real estate companies), but the two remaining active measures are troubling in their own way. They seem to ignore the statistics and causes of homelessness, and instead of incentivizing the building and supplying of affordable housing schemes, they remove incentives.
- A.B. 1481 follows the lead of Oregon’s recently passed statewide rental regulations,that prohibits landlords from removing tenants unless the state deems it to be a “just cause” (failure to pay rent, limited types of bad behavior, the owner’s decision to sell or move into the property if the lease allows it).
- A.B. 1482 caps annual rent increases at 7 percent a year plus the Consumer Price Index (which averages about 2.5 percent in the state), so about 10 percent a year. Originally, the bill would have capped rent hikes at 5 percent, but an “11th hour handshake deal” between lawmakers and the California Association of Realtors resulted in several amendments.
It’s also worth noting AB 1482 would not apply to units that are less than twenty years old, or buildings owned by landlords with ten or fewer single family homes. Also, 10% a year is a lot — if you were to hike rent up 10% every year for 10 years, you’re looking at a 159% cumulative rent increase. Nobodies wages increase like that.
Fundamentally, these two bills are intended to control landlords and rising rent, but could end up further straining landlord and tenant relations. These bills remove protections for landlords by making it harder to evict bad tenants, and take away incentives for quality renovations to a property. This makes the prospect of being a landlord far less enticing — especially for low-income tenants.
What Rent Control is Really About
First, we need to address the elephant in the room. Big “real estate players shelled out a whopping $77.3 million to stop Proposition 10 in California” in 2018. This is a vast amount of money, but they would have (and in fact have) spent more because, as I said before, anything that infringes on profit is going to anger business owners. Paradoxically for them, their lobbying seems to prove the public vilification of landlords further which can only strengthen their opposition.
However, it seems to me that this is less about affordable housing and more about pointing fingers. We are villainizing landlords and using the homeless as political tools. We are spending all this time and money fighting over who’s to blame and attempting to hold businesses responsible for the social neglect which is the responsibility of us all, but in truth can only be addressed by the state.
It’s an easy political win to attack landlords, to say they are terrible and we need to control their evil ways, because there’s a clearly defined enemy. But this won’t help anybody.
We should be using these tens of millions to enact integral social reform that builds and develops new affordable housing; that protects and cares for the 50,000+ homeless people in Los Angeles; and that helps support vulnerable low income families so they never ever end up homeless. We should be putting in place incentives that make a landlord want to offer affordable housing to low-income tenants — instead of removing them.
Housing and shelter is a human right, yes, but real estate is a business, and it currently makes less and less business sense to offer or supply affordable housing in California.