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Will Rent Control Fix California’s Housing Problems?

Jose Nino Comments

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Recently, the Sacramento Bee published a piece detailing some of the struggles residents of California are facing. One particular problem that has emerged in America’s post-Great Recession environment is that of regional housing crises. California has been heavily impacted.

The state is receiving national attention for its growing homelessness crisis. Activists have stepped up their proposals to solve the housing problem and rent control is a commonly advised solution In Sacramento, the activism was so strong that, last August, the Sacramento City Council came to a compromise that capped rent increases for properties built prior to 1995 to between 6 and 10 percent, and limited no-fault evictions for renters who have lived in their housing unit for at least a year or longer.

However, many activists believe this compromise and even California’s current rent control laws do not go far enough. Instead, they are pursuing a ballot initiative that limits rent increases to five percent, establishes an elected rent board, and curbs no-fault evictions for tenants no matter the length of their residency.

The sentiment behind calling for rent control is understandable. Homeownership has been on the ropes since the Great Recession, which saw millions lose their homes and drop out of homeownership altogether. Even with the crisis of the last decade subsiding, college-educated millennials are not in a great position for home buying. They are drowning in student loan debt and putting off the decision as a result.

Because of these troubling economic trends, people are now turning toward renting. In Sacramento’s case, this is rather pronounced. For example, in 2005, 52.8 percent of Sacramento city households owned their homes. In 2017, that number fell to 48.6 percent. It also doesn’t help that the number of housing permits collected have dwindled during the last decade, thus indicating that new housing developments are not being built as fast as before.

Given these circumstances, we can understand why people from Sacramento want rent control measures in place. Rent control is no magic solution though. In fact, an intervention like rent control causes numerous unintended consequences ranging from housing shortages to housing blight. When the government gets in the way of the market’s price system, expect trouble.

For residents of Sacramento, and the rest of California for that matter, entertaining alternatives such as the wholesale deregulation of land-use policies which would make it easier to develop housing. California is currently ranked 47th in land-use freedom, indicating it has a lot of work to do in terms of scaling back regulations. The question of affordable housing boils down to housing supply, which land-use restrictions impede.

Sacramento’s housing dilemma is a microcosm of the problems California is currently facing. Many will be quick to blame capitalism or greed, but capitalism’s detractors often ignore anti-freedom policies such as income taxes and excessive zoning which have made the state less attractive for economic opportunity. As a result, countless Californians have had to leave the state for more economically friendly jurisdictions.

To stop this, California policymakers at all levels need to rethink their interventionist approach to housing problems.

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