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Discussion 3 - Rent Control

Rent CONTROL

Using the following information indicates if the concept of rent control is likely to establish the long term goals desired by those seeking to expand the use of rent control. There is no wrong answer as those in favor will be in favor while those against will be against but history will provide the long term answer and already has provided it in some areas such as San Francisco & New York. There is an article on the internet regarding an actress in New York who was paying about $28/mo rent for a unit that, when rehabbed, will likely rent for about $5,000/mo.

1 Base your posts more on data gathered from your research and NOT your personal

feelings.

2. Remember as an Agent it is all about your clients and not about you.

For those of you who have traveled in the apartment areas of nearby cities with rent control in place for decades, indicate your opinion, here your personal opinion is ok, of the appeal & inventory condition in those areas when compared with similar apartment areas in other nearby cities with no rent control.

What cities have had an increase in residential rental inventory in those areas and what cities have seen much less. Don't limit your survey to only older buildings as there are newer buildings in some of those older areas as well? .

If Costa-Hawkins had been repealed, the repeal failed in the 2016 election but is coming back in various forms in 2022, bringing single family homes, condos & all new AND/OR old apartment units under rent control, will residential inventory contractors likely build more residential rental units or fewer?

NOTE: On Oct. 8, 2019 Gov. Newsom passed a state-wide rent control ordinance that took effect Jan. 1, 2020 with a roll-back feature to Mar. 15, 2019. Cities & Counties are still examining the impact of the law on their areas. The California Association of Realtors is developing forms dealing with these new regulations.

The purpose of this discussion is for you to have an open discussion of the strong, and weak points present on both sides. Stay with supportable information &/or personal observation with no emotional commentary.

NOTE: There is no place in data for emotions and history will be dealing with data.

Rent CONTROL (N)

Regulation by law of the rent a landlord can charge for domestic accommodation and of his right to evict tenants.

In California, only 32 percent of families can afford a median priced home. In Santa Clara, Santa Barbara, and San Francisco, prices have increased to the point that fewer than 20 percent of buyers seeking to purchase a home for a residence can afford it. It's fair to say that California is the most challenging place in America to buy or rent a home.

Soaring home prices have increased demand for rental housing. but California's rental housing market is also experiencing a severe lack of supply. California currently has a 30 year low rental vacancy rate of 3.6 percent, and, as a result, California's average rent is approximately 50 percent higher than the rest of the country. The lowest income renters across the state are spending approximately 68 percent of thei income on rent. For context, renters paying more than 30 per cent of their income on housing are considered to be "cost-burdened."

The overarching problem is rooted in the simple economics of supply and demand. California does not have an adequate supply of housing, which drives home prices and rents beyond people's reach.

Rent Control Is a Mirage

The housing supply crisis has fueled calls for stronger protections for low-income renters, including rent control policies. The problem is that research consistently demonstrates that mandating artificial prices for rental units reduces the supply of rental properties and creates an economic disadvantage for low-income families most in need of an affordable home. These are among the reasons why rent control has been outlawed in 27 states across America.

Despite the risks, more than a dozen California cities currently have rent control policies in place. However, the policy has not had a positive impact on housing affordability.

LOCATION MEDIAN HOME PRICE. AVERAGE MONTHLY APARTMENT RENT"

BERKELEY $1,290,000 $3,179

BEVERLY HILLS $3,885,000 $3,213

EAST PALO ALTO $ 917,500 $2,058

HAYWARD $ 650,000 $2,226

Los ANGELES $ 899,000 $2,964

Los GATOS $1,900,000 $2,686

OAKLAND $ 785,000 $2,790

SAN FRANCISCO $1,463,977 $3,803

SAN JOSE $ 998,000 $2,853

SANTA MONICA $2,510,000 $3,276

THOUSAND OAKS $ 795,000 $2,289

WEST HOLLYWOOD $1,825,000 $2,677

SOURCE: CLARUS MARKETMETRICS "RENTJUNGLE.COM"

While these policies may provide some relief for a small number of renters, research has demonstrated that rent control impacts the quality of life for families longer-term in the following ways:?

. Reduces existing supply of rental housing.

. Hurts low-income households.

. Deteriorates quality of rental housing.

. Increases costs for all renters.

. Reduces supply of rental housing.

When they can't earn a fair market price, investors have greater incentive to put their money in other types of property, which reduces the supply of rental properties. Investors who already own rental property are also likely to respond by converting buildings from residential to nonresidential use to earn fair market value, which takes more rental property out of stock.

Supply is also impacted due to low turnover. Rent controlled units are attractive to tenants, so, once they get into a control property, they are less likely to move regardless of whether they can afford to rent or buy a market rate property. This lowers turnover and limits the supply of affordable rental housing for the most in need.

Discrimination: Against Low-lncome Families

The negative effects of rent control are felt disproportionately by low-income people. First, not all rent controlled units are preserved for low-income tenants or "means tested."

Second, in an impacted market, the Legislative Analyst's Office points out that landlords are likely to exert more discretion to whom they rent, and factors including income and credit history can become even greater decision factors which can bias the selection.

Quality of Rental Properties Deteriorates

When rents are capped, landlords are less likely to maintain rental properties. When landlords have to subsidize their tenants' rents, maintenance declines and has a spiraling effect on the entire community by lowering values, which, in turn, lowers tax revenue to local government. Less tax revenue undermines government maintenance and services, and the cycle continues.

Higher Costs for All Renters

Rent control also contributes to escalating costs of market-rate rental properties and new construction not subjected to rent control laws. Rent control discourages investment in new construction, limiting supply and driving costs higher for the units that are built.

Further, rent control increases costs for any renter entering a market in the form of higher taxes to cover government programs that implement rent control policies.

Conclusion

Instead of government intervention in the form of artificial market mandates like rent control, Californians will benefit from lawmaker action that encourages housing development to boost supply throughout the state. Greater supply will increase affordability. Enacting policies that better match housing development with cities' population growth, instead of failed rent control schemes, will help California return to its status as a great state in which to live, work, and raise a family. The situation no matter how bad it is and, in many cases, initiate action to correct it so others will not have to face similar situations in the future.

A search for "affordable housing in CA" shows a number of locations where homes can be purchased at a much more affordable level than in the LA region.

https://www.homelight.com/blog/priced-out-california-places-you-can-still-buy

is only one search result, of several, worth looking into. Not included in the list is the community of Visalia, a gateway to the Sequoia National Forest with the giant redwoods. Some homes can be found there for about $200,000 with much lower rents available as well. Bakersfield is also much more affordable and is located only about 100 miles north of LA on the I-5 freeway.