Legislative Analyst’s Office cites flaws with rent control

Leg Analyst headerTo help California’s low-income families secur
e housing, elected officials should focus more on encouraging private residential development and less on existing government programs that subsidize construction or impose rent control, the Legislative Analyst’s Office says in this report.

Removing barriers to private construction, however, will take time and a political shift, says the report by the nonpartisan office, which advises the Legislature on fiscal and policy matters.
“Doing so will require policymakers to revisit long–standing state policies on local governance and environmental protection, as well as local planning and land use regimes,” says the study, Perspectives on Helping Low-Income Californians Afford Housing.

While extolling more private construction, the report highlights significant downsides to other approaches to housing issues, such as expanding rent control — a move being considered by several California cities.

“By depressing rents, rent control policies reduce the income received by owners of rental housing,” says the document, issued in February 2016. “In response, property owners may attempt to cut back their operating costs by forgoing maintenance and repairs. Over time, this can result in a decline in the overall quality of a community’s housing stock.”

The Legislative Analyst’s Office considered the impacts of expanding rent control in two ways — applying the policy to more properties and barring landlords from resetting rents at market rates when tenancies turn over.

“Neither of these changes would increase the supply of housing and, in fact, likely would discourage new construction,” the report says. “Households looking to move to California or within California would therefore continue to face stiff competition for limited housing, making it difficult for them to secure housing that they can afford. Requiring landlords to charge new tenants below–market rents would not eliminate this competition.”

The LAO also refers to the detrimental effects that rent control can have on a household — a phenomenon known as the “lock-in effect.”

“Households residing in affordable housing (built via subsidized construction or inclusionary housing) or rent–controlled housing typically pay rents well below market rates,” the study says. “Because of this, households may be discouraged from moving from their existing unit to market–rate housing even when it may otherwise benefit them — for example, if the market–rate housing would be closer to a new job. This lock–in effect can cause households to stay longer in a particular location than is otherwise optimal for them.”

Despite strong evidence that increasing the private housing stock would bring down prices, much of the focus remains on government programs — such as rent control — that fail to help many of the residents who need it most and never address the underlying problem — a lack of housing, according to the LAO report.

“Existing affordable housing programs assist only a small proportion of low–income Californians,” the LAO says. “Most low–income Californians receive little or no assistance. Expanding affordable housing programs to help these households likely would be extremely challenging and prohibitively expensive.”

The LAO report also debunks some myths about the impacts of residential construction. For example, many believe that new housing doesn’t help low-income families because new homes tend to cater to wealthier households. While this tends to be true initially, residences initially built for the rich aren’t tied to that market forever.

“New housing generally becomes less desirable as it ages and, as a result, becomes less expensive over time,” the study says. “Market–rate housing constructed now will therefore add to a community’s stock of lower–cost housing in the future as these new homes age and become more affordable.”

The Legislative Analyst’s Office concedes that remedying California’s housing crisis will come neither quickly nor easily.

“The changes needed to bring about significant increases in housing construction undoubtedly will be difficult and will take many years to come to fruition,” the LAO says. “Policy makers should nonetheless consider these efforts worthwhile. In time, such an approach offers the greatest potential benefits to the most Californians.”

Beacon Economics study criticizes rent control

Evidence that rent control is the wrong approach to solving California’s housing crisis continued to mount in 2016.

A Beacon Economics report found that low-income tenants in cities with rent control are not likely to benefit from the policy as intended.

Moreover, California’s nonpartisan Legislative Analyst’s Office published a study that points to flaws with rent control.

The Beacon Economics report found that rent control helps a select few — those lucky enough to live in a rent-controlled unit when the law takes effect. Once benefiting from rent control, however, many individuals stay put to keep reaping the benefits — even if they don’t need the assistance.

“The data suggests that this is particularly true of higher-income households who have a propensity to move less frequently,” the study says. “In cities like Santa Monica or San Francisco, where rents are very high, this means that wealthier individuals, who might otherwise move to more expensive housing, stay in their lower-cost apartments.”

Christopher Thornberg, a founding partner of Beacon Economics, said this restricts the available supply of local affordable housing.

“You encourage middle-income households to stay in older stock, which typically is made available for low-income families in normal markets, and by doing that, you end up reducing the supply available for low-income families,” Thornberg said at Outlook. “So not only is this policy not effective — it actually hurts the people we’re trying to help.”

The Legislative Analyst’s Office also cited problems with tenants living for extended periods in rent-controlled housing — a problem termed the “lock-in effect.”

“Households residing in affordable housing (built via subsidized construction or inclusionary housing) or rent–controlled housing typically pay rents well below market rates,” the study says. “Because of this, households may be discouraged from moving from their existing unit to market–rate housing even when it may otherwise benefit them — for example, if the market–rate housing would be closer to a new job. This lock–in effect can cause households to stay longer in a particular location than is otherwise optimal for them.”

The Beacon report cites rent control’s chilling effect on multifamily construction. This stifles supply and drives up prices for all those living in unregulated rentals, including a community’s most disadvantaged residents.

In its analysis, Beacon used demographic and housing data from the 2000 U.S. Census and the 2013 American Community Survey.

Rent control in California

Studies consistently demonstrate that price controls cripple the commodity they regulate. This appraisal holds true in the California communities that enforce price ceilings on rents.

When rent control is in place, developers have fewer incentives to build apartments, exacerbating housing shortfalls. Likewise, owners of rent controlled units have scant motivation to maintain their units, let alone make upgrades. Even as communities fall into disrepair, prices across the market rise because new housing isn’t getting built.

Meanwhile, rent controlled frequently aren’t occupied by the people they are intended to help. Often, middle-  to high-income professionals secure rent controlled units, and once they’re in place, remain entrenched for years, if not decades.

Lower-income workers and their families are relegated to higher-priced housing, far from jobs and schools.

Inglewood council approves rent control ordinance

Despite opposition from the California Apartment Association, the Inglewood City Council on Tuesday unanimously approved a permanent rent control ordinance, capping rental increases for most affected apartments at 5% per year.

Council members had been expected to vote on an 8% cap, however, they agreed to lower that limit amid pressure from tenant activists at the meeting. An 8% increase will still be allowed under certain circumstances, such as after long periods of keeping rents below 80% of the median price. Rents would again be capped at 5% after reaching market rates. Owners making improvements costing $10,000 or more also would qualify for 8% rent increases.

Under state law, the rent cap will apply to multifamily housing built before 1995.

The council also approved a so-called “just cause” eviction policy that will apply after two years of tenancy. Such policies require owners to prove “cause” in court or before a political body every time they need to remove a problem resident. To terminate at tenancy without cause, a landlord will have to pay relocation fees equal to three months’ rent. The council previously considered relocation fees equal to nine months’ rent but lowered the figure.

CAA’s opposition to the ordinance was wide-reaching and included an email campaign by members.

The council will need to approve the ordinance once more, with a second reading, to formalize adoption of the policies. The city’s current moratorium on rent increases over 5% is expected to be extended at next week’s meeting and be in place until the permanent measure takes effect.

Campaign website launches to fight rent control measure in National City

CAA members wanting to prevent rent control from taking hold in San Diego County are urged to visit a new website — ProtectOurHousing.com.

The website comes from National City Residents for Fair & Equitable Housing, the campaign fighting the rent control initiative on National City’s Nov. 6 ballot. The California Apartment Association spearheaded the creation of the campaign.

“Measure W is a poorly written ballot measure that jeopardizes the future of National City, the website says. “The flawed Measure W will reduce the number of available rental units in National City and result in the deterioration of the homes that remain. We need to maintain and improve the quality of life in National City, not destroy it.”

Whitney Benzian, CAA’s vice president of public affairs in the San Diego region, urged members to visit ProtectOurHousing.com and join the mounting opposition to Measure W.

“We have the support of Mayor Morrison and many prominent community leaders because they understand this measure will stop all the progress National City has been making the last few years,” Benzian said.

The No on W site includes 10 reasons why voters should reject Measure W, invites visitors to join the No on W campaign and offers a portal for making financial contributions.

In early July, the San Diego County Registrar of Voters confirmed that the National City Rent Control and Community Stabilization Ordinance. had qualified for November’s ballot. The Alliance of Californians for Community Empowerment had directed the signature-gathering effort to qualify the initiative.

If approved by voters, the ballot measure will create a rent board funded by annual landlord fees, cap annual rent increases based on the rate of inflation and impose “just cause” eviction policies.

“Measure W makes it very difficult to evict problem tenants,” the website against Measure W says. “Those who put the safety of their neighbors at-risk by dealing drugs or engaging in other dangerous activities will be safeguarded from evictions, degrading neighborhood quality of life.”

Rent control threat surfaces at Glendale City Hall

Glendale’s mayor and some council members have expressed interest in pursuing a rent control ordinance and have directed city staffers to draft a report on the policy.

The direction comes as the Glendale Tenants Union applies intense pressure on the council to cap city rents. The union shifted its attention to City Hall after twice failing to place a rent control initiative before voters.

It also follows a shift of opinion on the council. This week, Mayor Zareh Sinanyan, who previously voiced opposition to rent control, changed his position, the Los Angeles Times reported.

“What prompted it is just the dire nature of the situation,” Sinanyan said, as reported by the Times. “Rents are out of control, going up, and there appears to be no let-up in the rate at which they’re growing.”

The California Apartment Association, which contends that rent control is a failed policy that would exacerbate the regional housing shortage, is mobilizing its members to help stop any such rent control ordinance from coming to Glendale.

The council also appears to be taking a page from the Los Angeles County Board of Supervisors, which voted last month to draft a temporary rent control ordinance for unincorporated areas of the county. That ordinance will cap maximum annual rent increases at 3 percent for qualifying units. CAA and its allies continue to oppose this rent control proposal and is assessing its options.

At Tuesday’s Glendale City Council meeting, Councilman Vrej Agajanian referenced the county’s move, saying he wonders why the city couldn’t cap rents at 5 percent, the Times reported. Mayor Pro-tem Paula Devine also has said she wants to monitor the effects of the county ordinance.

Efforts to bring rent control to Glendale stretch back to last year.

In October 2017, rent control proponents submitted more than 11,000 signatures to qualify a rent control measure for the city ballot, but the clerk rejected the petition, citing a number of problems. This year, the Tenants Union began collecting signatures to place rent control on the Nov. 6 ballot but missed the deadline. The union, however, kept circulating its petition in hopes of meeting an Aug. 6 cutoff to make the 2020 ballot. Proponents gathered less than half of the required signatures.

The union then indicated it would urge the Glendale City Council to adopt rent control. If that doesn’t work, the union may circulate another rent control petition, again eying the 2020 election or a special election.

If you are interested in helping stop rent control in Glendale or other parts of Los Angeles County, contact Beverly Kenworthy, CAA LA vice president of public affairs, at bkenworthy@caanet.org.

Rent control group concedes it lacks signatures for ballot measure in Pomona

Pomona has become the latest Southern California city where tenant activists say they haven’t collected enough signatures to qualify a rent control measure for November’s ballot.

Tenant activists in Pomona were unable to collect the 6,256 valid voter signatures needed to qualify their measure for the fall election.

Signature drives to place rent control before voters this fall also have come up short in Long Beach and Pasadena, while campaigns remain active in Glendale, Santa Ana, Inglewood and National City.

The Pomona Housing Stabilization, Fair Rent, and Homeowner Protection Ordinance threatened to create a rent board and cap annual rent increases based on the rate of inflation.

While Pomona Unified for Stable Housing won’t be turning in signatures, it may ask the City Council to place the measure on November’s ballot directly.

Long Beach rent control advocates miss deadline for November ballot

A proposed rent control measure for Long Beach won’t appear before voters in the fall, but the measure could still qualify for a later election.

Housing Long Beach missed its June 1 deadline to submit more than the 27,000 signatures required to qualify the initiative for the city’s November 2018 ballot.

Rent control advocates, however, vowed to keep circulating their petition, and if they file the required number of signatures by July 30, the measure could still appear on a later ballot, likely in March 2020.

The Housing Long Beach measure would limit annual rent increases to the rate of inflation and establish “just cause” eviction policies. The measure also would create a rent board and roll back rents to January 2017 levels.

CAA will continue to work with its allies to defeat any rent control attempt in Long Beach and elsewhere in California.

Efforts to place rent control measures before voters this November remain underway in Southern California cities including National City, Santa Ana, Glendale and Inglewood. A signature-gathering effort to place rent control before voters in Pasadena fell short by more than 2,000 votes.

If you are interested in helping prevent rent control in Long Beach and Inglewood, please reach out to Fred Sutton, CAA’s vice president of public affairs for these cities, at Fsutton@caanet.org.

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Tenant activists, landlords argue for and against rent control before San Diego council committee

Although not on the agenda, arguments over rent control dominated the discussion Wednesday at a San Diego City Council committee meeting.

Signage brought to Wednesday’s meeting by tenant activists.

Scores of public speakers – both for and against rent control – appeared before the Smart Growth and Land Use Committee, which includes four City Council members.

The meeting was designed to focus on anti-displacement, Section 8 vouchers and issues surrounding the expiration of San Diego’s affordable housing stock.

That didn’t matter to San Diego Tenants United, a media-savvy but hastily organized tenant-advocacy group that took an aggressive stance in hijacking part of Wednesday’s discussion.

Its members were rude and demanding when addressing the committee and the property management representatives in the audience. This tone was not well-received by the public officials, who had to call for calm in the crowd more than once.

The tenant activists presented a petition calling for rent control, saying they had 11,000 signatures. They also requested that rent increases in the city be capped at 2 percent. Joining in their demands were members of community organizing groups such as Alliance of Californians for Community Empowerment, Partnership for the Advancement of New Americans, and the labor union UNITE HERE.

Before the hearing started, San Diego Tenants United held a rally outside City Hall, calling for an emergency rent control ordinance. It was well-covered by local media, giving a false public impression that City Council members would consider such an ordinance Wednesday. The group also garnered media attention in the preceding days, spurring many local “mom and pop” rental housing owners to attend the meeting and speak about the negative consequences rent control would bring.

The meeting was so well-attended that staff opened two overflow rooms. The California Apartment Association and other business groups, including the San Diego Association of Realtors, were on-hand to monitor the hearing and provide information. CAA had also initiated conversations with council staff prior to the meeting to explain the adverse effects of rent control.

While no action was taken Wednesday, committee Chairwoman Georgette Gomez said she expects to have action items ready when the committee meets again May 21.

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Signature-gathering underway for rent control measure in National City

An effort to place rent control before National City voters this November has entered the signature-gathering phase.

The city attorney for National City recently gave petitioners the green light to begin circulating a petition for a measure titled the National City Rent Control and Community Stabilization Ordinance.

Tenant advocates filed the initiative with the city clerk in early March and have been working for some time to launch their signature-gathering campaign.

The California Apartment Association is organizing housing providers and industry partners to defeat any rent control measure that may appear before voters.

Price controls on the housing market have been proven failures wherever implemented. Like in other jurisdictions, rent control in National City, a medium-sized city between San Diego and Chula Vista, would cause far more harm than good.

National City joins several other Southern California cities where tenant activists are pursuing rent control via the ballot box. Just this week, tenant activists in Santa Ana filed preliminary paperwork to place rent control before city voters in November. Efforts to place rent control on the ballot are also underway in Glendale, Inglewood, Long Beach and Pasadena.

At the same time, tenant operatives are attempting to qualify a statewide ballot measure to repeal the Costa-Hawkins Rental Housing Act, landmark legislation that protects property owners and renters from radical, local rent control measures.

Rent control ballot initiative filed in Santa Ana

Tenant advocates in Santa Ana have filed preliminary paperwork to place a rent control measure on the November ballot.

The city attorney will have 15 business days to put together a title and summary for the measure. After a public notice is published by the city, the proponents will then have 180 days to gather roughly 12,000 valid signatures to place the initiative on the ballot.

The ballot measure, dubbed the “Community Preservation, Rent Stabilization and Renters’ Rights Act,” would use the rate of inflation to set caps on annual rent increases, with a hard limit at 5 percent. It also would impose “just cause” eviction policies in the city.

The filing of the initiative came just weeks after the Santa Ana City Council rejected rent control at a public study session.

The California Apartment Association, which opposes rent control in all forms, will lead a coalition to defeat the proposal.

“The tenant activists are looking to force a very bad housing policy on a good city,” Tommy Thompson, senior vice president of CAA in Southern California, told the Orange County Register. “Rent control would only make the housing crisis in Santa Ana worse.”

Santa Ana is the latest Southern California city where tenant activists are pursuing rent control via the ballot box.

Farther south, tenant activists in National City recently received approval to begin collecting signatures for a rent control measure targeted for November. Efforts to place rent control before voters also are underway in Glendale, Inglewood, Long Beach and Pasadena.

At the same time, tenant operatives are attempting to qualify a statewide ballot measure to repeal the  Costa-Hawkins Rental Housing Act, landmark legislation that protects property owners and renters from radical, local rent control measures.

Papers filed to put rent control on Sacramento city ballot

Tenant advocates have filed preliminary paperwork to place a rent control measure before voters in the city of Sacramento.

The initiative would amend the city charter to impose inflation-based rent control and “just cause” eviction policies in the capital city.

Under the measure, the rent charged as of Feb. 20, 2018, would serve as the base rent. Maximum annual increases would then be tied to the consumer price index. The measure would also create an nine-member rent control board, require landlords to pay an annual rental housing fee, and establish relocation assistance for displaced tenants.

“We are now analyzing the proposed ballot measure, and we are organizing the rental housing industry and our allies to defeat it,” said Jim Lofgren, senior vice president of the California Apartment Association’s North Valley region.

The notice of intent to circulate the initiative petition was filed with the city clerk on Tuesday, Feb. 20. The city attorney will now review the measure, dubbed the Sacramento Renter Protection and Community Stabilization Charter Amendment, and if it meets legal muster, issue a ballot title and summary by March 7.

Rent control proponents can only begin collecting signatures after fulfilling certain procedural requirements. They’ll have until May 15 to qualify the measure for the November election.

The submission of paperwork to place rent control before Sacramento voters comes just one month after tenant advocates in Santa Cruz filed papers for their own rent control measure.

Over the past few years, CAA has successfully fought rent control ballot measures in five Northern California cities: Santa Rosa, Pacifica, Burlingame, Alameda and San Mateo. Voters, however, approved rent control in two cities: Richmond and Mountain View.

Tenant advocates in Southern California are also turning to the electorate to spread rent control. Efforts are now underway to place rent control before voters in cities including Pasadena, Long Beach and Inglewood.

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