Unintended consequences of California rent control

Chuck DeVore writes for Forbes about the likely impact of California’s latest rent-control regime.

The main reason why California’s poverty rate has remained stubbornly high—proportionately 13% higher than Mississippi’s 16.1% and 26% higher than arch-rival Texas’ 14.4%—is that California’s housing costs have remained among the highest in the nation.

The U.S. Bureau of Economic Analysis estimated that California’s rent index (a broad measure of real estate costs that includes owner-occupied housing) was 153.7 of the U.S. average of 100 in 2009, dipping to a low of 147.3 in 2015 and then rising to 150.6 in 2017 as California’s recovery from the Great Recession caused housing demand to outstrip supply.

California’s new housing stock has been severely restricted by the state’s myriad of web of development fees, restrictive zoning rules, environmental laws—including greenhouse gas restrictions—and lawsuits. Now it’s about to get much worse, with statewide rent control further discouraging new investment in the state.

Just as Census was reporting California’s worst in the nation poverty rate, the California Legislature was sending Gov. Gavin Newsom Assembly Bill 1482, a measure which imposes a 5% above the rate of inflation annual cap on rent increases or 10%, whichever is lower, for rental properties 15 years or older—in other words, most of California’s homes and apartments. The California Association of Realtors said that the bill will, “…impose onerous standards upon small property owners and, in turn, exacerbate the state’s housing crisis.”

Mitch Kokai / Senior Political Analyst

Mitch Kokai is senior political analyst for the John Locke Foundation. He joined JLF in December 2005 as director of communications. That followed more than four years as chie...

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