The Coalition for Affordable Housing is strongly criticizing an anti-rent control study that pleased Wall Street landlords and made lots of headlines — but is so flawed and narrow to be useless in the debate about housing affordability across California. The unsound claims by the two professors, former Wall Street employees, that rent control has increased gentrification in San Francisco are entirely misleading.
The study, “The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality: Evidence from San Francisco,” by Stanford professors Rebecca Diamond and Tim McQuade is flawed in multiple major ways. Among the major flaws: the report limited its scope to 2-4 unit buildings in San Francisco – a small fraction of apartments in the city; only attempted to calculate the economic benefits to tenants who lived in rent stabilized units between 1994-2012; and blames condo conversions on San Francisco’s rent control laws, instead of the many loopholes in California law, like the Ellis Act, which permit them.
Before Diamond and McQuade took positions at Stanford, Diamond was a Goldman Sachs asset manager and McQuade worked for UBS Investment Bank. Both have a history of scholarship that seeks to minimize the effects of gentrification on the middle-class and low-income. Their work has even argued the drawbacks of building low-income housing in richer neighborhoods.
The flawed Diamond-McQuade study was not peer reviewed and has gone through at least three drafts, with different datasets all to produce a pro-Wall Street, pro-corporate landlord narrative. Despite this, the authors had to admit that rent control provides stability and economic benefits to tenants, beginning with $7.1 billion in the first draft of their study, then ending at $2.9 billion their most recent draft after a switching-out of datasets and methodology.
Diamond and McQuade also used limited mathematical models that don’t take into account the real-world damage that corporate landlords are causing in neighborhoods, and are incredibly mum on the key factor exclusive to the Bay Area: huge salary inequities that let tech workers lay down $4,000 a month in rent.
Many in the media missed the key story here: that Diamond and McQuade ignored stunning new wealth inequality, real estate speculation, and insufficient tenant protections as the cause of San Francisco’s rabid gentrification. What is left of the working class in San Francisco is due to the city’s longtime rent control and tenant organizing.