Rent Control Is Missing Its Target, Helping Neither the Needy Nor Housing

The first major review of Los Angeles rent-control ordinances in four years was submitted to the City Council on June 24, in preparation for the first of a number of scheduled hearings on Friday. While the basic premise of the study--”It ain’t broke . . . don’t fix it . . . “--was not unexpected, facts and figures drawn from the study raise disturbing questions regarding rent control as an effective means of subsidizing affordable housing for low-income groups. They also pose serious problems regarding the upkeep and preservation of the stock of affordable housing.

A careful reading of the review indicates what most landlords have known for some time: Rent control does not per se benefit the needy for whom it was intended. The ordinances have instead created a class of unintended beneficiaries, whereby one segment of the private sector (landlords) has been singled out to subsidize another (renters who are not truly needy).

It’s time to take a long, hard look at establishing an effective qualifying criterion to ensure that poor people alone benefit from a housing subsidy. In addition, we challenge the notion that landlords alone should be responsible for providing decent low-income housing and for making sure that it will continue to be available to those most in need of it. After all, private food-clothing-building-transportation providers are not asked to subsidize the needy as a cure for society’s ills.

Should small-building owners, the “mom and pop” landlords who make up the bulk of the ownership of rent-controlled units, according to the survey, be asked to continue to shoulder this burden alone?

It is becoming increasingly difficult for these small-business owners to keep this vitally important housing stock viable and in good repair when financing, interest and repair rates are up, along with vacancy rates. This at a time when, the study also indicates, operating profits and tax benefits have declined. This bodes ill for the look and the future of our city.

Since there is little profit left to be had from these older buildings subject to rent control, from which come affordable housing, there is decreasing attraction for private investors to maintain and invest in them. After all, the buildings can be knocked down and new housing created, which will not be rent-controlled.

What rent control does, therefore, to our ability to house the poor and to prevent the deterioration of housing stock, as seen in the case of the rent-controlled South Bronx, is frightening. In Los Angeles in 1987 alone, 10,000 such units of affordable housing were demolished (in some cases because the rent-control law prevented evictions for major renovations, and in many cases to make way for non-rent-controlled housing). Indeed, 15 states have passed bans on rent control as a positive step toward meeting housing needs.

Here are some statistics drawn from the Rent Stabilization Review itself: Rent-controlled households with more than $40,000 in annual income paid the lowest average share of income ($15.4%) for housing, while the situation was sharply reversed for those earning $10,000 or less per year. The percentage of income spent on housing by the average household in the latter group rose to 58%.

In addition, rent-stabilized households at the high end of the benefit scale were listed as being headed by whites (three-fifths in a minority-dominated city)--and, significantly, they were households not made up of families (three-fourths of the households reaping the highest benefits were listed as being made up of no more than two persons, and nearly half were units occupied by only one person--many of whom were not on fixed incomes). Also, percentages of income paid by whites has declined while percentages paid by minority groups increased greatly. The highest share of all in income paid for rent still remains with the elderly on fixed incomes.

Members of the Apartment Assn. of Greater Los Angeles have always supported the idea of housing subsidies for the poor. But we would like to go forward in working with responsible tenant groups and the city to establish an affordable-housing trust fund to administer a program of direct rental assistance and emergency shelter for those who meet qualifying criteria and to provide the necessary seed capital and incentives so that public/private partnerships once again foster affordable-housing construction. At the same time, as the review emphasizes, we would like to see reasonable profit incentives restored to the small-apartment owner so that affordable housing can be kept in good repair and can continue to exist.

Rent control hasn’t worked the way it was envisioned to do. We challenge the city to join us in finding a more effective way to target aid to the truly needy, to spread the burden of doing so more equitably and to get affordable-housing construction moving again before we run out of time.