Rent Control Reduces New Development: Bug or Feature?
The article examines rent control's impact on housing development in California, highlighting concerns that it may deter new construction and alter community character, despite legal allowances for building new homes.
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The article discusses the implications of rent control on new housing development, particularly in California. It highlights a perspective from Republican Tony Strickland, who argues that the reduction in new development caused by rent control could be seen as a deliberate feature rather than a bug. Strickland points out that recent state laws prevent cities from restricting development, but if rent control were permitted, cities could effectively halt new construction by making it financially unviable. He cites concerns that measures allowing cities to impose rent control could lead to stringent affordability requirements on new multi-unit projects, which would deter developers and alter the character of communities like Huntington Beach. Louis Mirante adds that while it may be legally permissible to build new homes, the financial realities would render it nearly impossible to profit from such developments. The discussion raises questions about the balance between local governance, housing policy, and the economic viability of new construction in the context of rent control.
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4 commentsRent controls need to be combined with long-term social housing policy to be effective.
The first way, as the author point out, it directly disincentivizes developers from building new homes. The second way is more insidious: it gives politicians, typically progressive politicians, the needed cover to claim they are addressing high rents, while they continue to support the real driver of housing costs: restrictive zoning that bans new construction and leads to supply shortages.
Inclusionary zoning operates in a similar manner.
Of course, this immediately has these first-order effects:
- Putting thousands of home owners into financial dire straights, by reducing their income at the same time that their refinanced mortgages are increasing by as much as 100%.
- Eliminating thousands more rental units of coming onto the market, by eliminating the AirBnB income stream necessary to rationalize building or renovating those units into existence.
These first-order effects are so obvious, that it cannot be an accident -- the assumption would assume such a low intelligence on the part of the politicians enacting this legislation as to be deeply insulting.
But the alternative explanation; that this was an intentional result, also brings into question:
Why would a politician want to simultaneously destroy both tourism (making short-term rental accommodations both less plentiful and more expensive), while also destroying thousands of rental units from being constructed, making long-term rentals both less plentiful and more expensive?
The obvious alternative -- goosing the production of all types of short- and long-term rental units by encouraging the production of AirBnB units (increasing their supply, thereby decreasing their cost and profitability, encouraging the migration of existing AirBnB stock to long-term rentals) -- appears to have bypassed the BC political elite.
How (and why) would they not want that?
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