The highly regarded Haas Institute for a Fair and Inclusive Society at UC-Berkeley has released a telling new report that shows the passage of Proposition 10 is crucial for millions of Californians. The Berkeley study found that allowing local communities to create their own housing policy to limit excessive rents is critical for stabilizing California’s broken, unaffordable housing market.
The Berkeley study pointedly notes that California laws, including Costa-Hawkins, which Prop 10 will repeal, hinders “our collective ability to imagine and advance a future that is only possible through greater affordability for all.”
Prop 10’s limited scope of allowing local communities to urgently address their housing-affordability crises is desperately needed to rein in California’s skyrocketing rents.
“While California is faced with a range of housing issues that require us to pursue various policy goals, the goal of addressing the housing affordability and displacement crises facing overburdened renters must be prioritized,” Nicole Montojo, a Haas Institute housing analyst and co-author of the study, notes.
“When the housing market is as dysfunctional as it is in many parts of California, tenants are effectively subsidizing landlords with rent payments above what a fully competitive market would allow landlords to charge,” Stephen Barton, a former housing director for the City of Berkeley and co-author of the study, says.
The Berkeley study outlines the needed benefits and unique possibilities of rent control and allowing local communities to address exorbitant rents. Barton and Montojo note:
- A cost-effective and responsive policy approach: Where most other programs require tremendous financial resources and take a great deal of time, renter protections can be established as a matter of law and the administration of rent control is typically paid for through modest per-unit fees. For example, rent board programs in Santa Monica and Berkeley are cost-neutral, with fees collected sufficiently covering all operating costs. Renter protections immediately advance the goal of stabilizing rents for historically marginalized residents who have built their communities and contributed to the value of their neighborhoods long before the present wave of economic development. As these places experience increased public investments in infrastructure and services, as well as new economic development and job growth, rent control helps to ensure that existing residents can benefit from the improvements that they helped create.
- Housing stability for existing tenants: Rent control is, first and foremost, an anti- displacement tool. The vast majority of academic studies on rent stabilization find that it increases renters’ ability to choose to remain in their homes. A recent study of the effects of rent control in San Francisco found that it increased tenants’ probability of staying in their homes by nearly 20 percent, and that without the financial savings that rent control provided, they would otherwise have left the city. The literature also shows that these effects of stability are greatest for older tenants and long-term tenants, thereby supporting aging in place and the preservation of community connections.
- Improved affordability: Several studies have shown that rent control provides financial benefits to current tenants. Research by UCLA professors William Clark and Allan Heskin on the early impacts of rent regulations in Los Angeles (prior to the enactment of Costa-Hawkins in 1995) determined that after living in rent-stabilized homes for three to five years, tenants’ rents were between 26.5 to 30.9 percent lower than market rent, and for those with tenure between five and ten years, this discount was as high as 36.8 percent. Although the evidence is mixed, some studies have found that in cities with rent regulations, even non-controlled units actually had slightly more affordable rents compared with units in cities without rent control. A recent study of the effects of rent control in San Francisco found that benefits to tenants averaged “between $2300 and $6600 per person each year, with aggregate benefits totaling over $214 million annually.” The financial benefits of rent control can help renters to not only meet their basic needs, but open up opportunities for individual advancement and well-being.
- Preservation of economic diversity: Egregious rent increases continue to place more of the existing housing stock out of reach for lower-income tenants, thus increasing California’s already overwhelming affordability gap. Rent control, particularly when combined with regulations related to condominium conversions and other renter protections such as “just cause for eviction” ordinances, can help prevent the expansion of California’s existing shortfall of housing for lower-income renters. In doing so, it can help to maintain economic diversity and integration. A study of the effects of lifting rent control in Cambridge, Massachusetts found that after the policy’s repeal, not only did the value of formerly stabilized properties increase by 18 to 25 percent in ten years, but the value of non-controlled units increased by 12 percent. The researchers suggested that wealthier households moved into the city after lower-income tenants had been displaced by unregulated rent increases, while they may not have been willing to move in prior to decontrol. This suggests that rent control can contribute to preventing displacement that would ultimately lead to more exclusionary, economically- segregated cities. As we note below, however, rent control is only a step in this direction and must be supplemented by additional government initiatives to raise incomes and reduce poverty.
The in-depth research also underscores the need for California to focus on empowering local communities to shape and set the policy that directly impacts their residents. Key excerpts:
- “Housing is a basic need, fundamental to a healthy and stable life. All Californians should have the choice to stay rooted in their homes and communities, benefit from new investments and opportunities in their neighborhoods, and live without fear of unjust rent increases or eviction.”
- “Rent control alone does not solve for the full range of Californians’ housing needs, but it addresses one key need held by a large segment of California’s population: the growing housing costs that burden over 9.5 million renters, while also advancing our state’s broader goals of social equity and progress. Rent control is first and foremost about protecting and prioritizing existing residents’ stability, which preserves access to emerging opportunities in their current neighborhoods and helps open up new housing choices that come with increased financial stability.”
- “There is an emerging framework among researchers, community advocates, and policymakers of a comprehensive policy approach that includes five strategies (the “five Ps”): … protection, production, and preservation—as well as two important additions— power and placement. Rent control and other renter protections provide a necessary foundation for the remaining four Ps.”
- These types of policy solutions “would have broad benefits, making more of tenants’ incomes available to be spent on other necessities, reducing traffic, freeing up public resources for other priorities, and increasing the stability and cohesion of neighborhood communities.”