The Rabbit Hole of Rent Control

Landlords abandon markets. Developers stop building rentals. Apartment inventory drops. Resident mobility grinds to a halt. History, analysts and economists say that rent control will only worsen already bad housing shortages in those places with the greatest need for housing. Apartment owners don’t want it. Associations warn of its perils. In 1999, Forbes weighed in when it published, “The Dumbest Ideas of the Century,” citing the worst economic ideas of the 20th Century. Why, then, did Oregon become the first state in the nation this year to pass statewide rent control? And—after failing at the ballot in 2018 with 60 percent voting against—why did tenants rights groups help introduce two rent control bills in the California legislature, where Governor Gavin Newsom has promised that the bills will become law? What’s a constituency to do? Rent control refers to laws and ordinances that set artificial price controls on rent regardless of ownership, property profitability or market demand. It restricts the rights of property owners, limiting how they may operate their assets and often limiting the relief owners may seek from non-paying renters. In addition, rent control reduces the investment return and value of an impacted building, which is, in effect, a partial expropriation of private property. Still, legislated rent control may be on its way in the Golden State. Demand has outstripped supply for years as California continues to create more jobs than its supply of housing can accommodate. California’s renters are paying, on average, more than half of their incomes on housing as the state’s housing crisis intensifies. According to the state’s Department of Housing and Community Development, California needs to build 180,000 new homes annually through to 2025 to meet its growing housing demand. It’s created less than 80,000 annually in recent years. For residents, the short supply of housing is felt in...