Rent Control’s Impact on Housing Unresolved by Debate at Hearing

As 150 elderly persons loudly protested outside, Assemblyman Dan Hauser conducted hearings in Los Angeles on Thursday into local rent control laws that he claims drive away badly needed apartment development in California.

But a parade of officials from West Hollywood, Santa Monica, Berkeley and Los Angeles instead urged Hauser to turn his critical eye to cities without rent control, claiming that California’s rent-control cities are leaders in the building and rehabilitating of low-income housing.

Hauser’s aide, Stephen Holloway, said the premise of the hearing was “that the more stringent the rent control, the less affordable housing is built.” Hauser (D-Arcata), chairman of the Assembly Committee on Housing and Community Development, has authored a bill to allow the state to intervene in rent-control laws.

Hauser’s featured speaker, Anthony Downs, a rent-control foe and free market advocate from the Brookings Institution, said regulations such as rent control and downzoning are “a central cause of high housing prices and rents in California.”

Downs singled out cities with strict rent controls, such as West Hollywood and Santa Monica, but was challenged by officials of those cities to compare their housing records with areas where no rent controls exist.

“What you should focus on is the lack of affordable housing in non-rent control cities,” West Hollywood Councilman John Heilman said. “What you’ll find is that . . . their shortages of affordable housing and housing problems are far worse.”

In a testy exchange with state Assemblyman Tom Hayden (D-West Los Angeles), Downs claimed that housing construction in Santa Monica has fallen dramatically since the adoption of rent control 10 years ago, a situation that he said will drive up rents in the long run.

Demanding that Downs produce proof, Hayden responded, “Santa Monica in fact creates a higher percentage, per capita, of affordable housing than any city in the state. . . . It’s the envy of the state. . . . There’s no evidence after 10 years (under rent control) that your ideology is correct.”

The hearing was described by several city officials as the launching of a statewide effort by landlord groups to wrest control from cities and allow the state to decide when rent control is proper.

Hauser, a rural legislator known for his timber and outdoor expertise, does not represent any cities with urban housing problems. He has proposed a bill that would allow the state to alter or abolish strict rent controls in cities if the state determines that the laws hurt housing development.

“Hauser knows cows, not tenants,” said Larry Gross, a longtime West Hollywood rent-control activist. “Why is he crusading against cities who are going out of their way to attack the housing crisis, and why is he bringing in a rent-control foe like Tony Downs?”

Outside, a throng of mostly elderly protesters carried an effigy of an affordable home sitting in a coffin and chanted, “Hey, hey, ho, ho, Dan Hauser’s got to go!” One man carried a sign reading, “Don’t Make Grandpas Homeless,” while another said, “More Housing, Less Hauser.”

Hauser insisted, however, that he was not fighting rent control but was instead trying to boost housing construction in cities where controls might dampen developer enthusiasm. He said he is concerned about laws in a handful of cities that prevent landlords from raising rents on vacant units.

(By contrast, in Los Angeles rents are protected only until a unit is vacated, at which time the landlord can raise it to any level he chooses. Known as “vacancy decontrol,” it has allowed rents here to escalate 110% since 1980 while providing some protection to renters as long as they do not move, city officials said.)

In a 1988 study, Downs found that mild rent controls such as Los Angeles’ do not hurt development. But he contends that cities that prevent landlords from boosting rents on empty units are wrongly keeping rents from rising to whatever the market will bear.

Removing controls from a choicely located but still solidly middle-class city such as Santa Monica “may eventually exclude almost all low-income and moderate-income households and permit only wealthy residents to live there,” Downs wrote in his study. “But that is an inherent and essential aspect of the free market system.”

Despite many studies on the rent-control issue, there is little clear-cut evidence that rent control is the underlying cause of downturns in housing development.

Studies show that apartment development is more directly hampered by regional economic downturns, restrictive land-use laws and downzoning, the removal of federal tax incentives for investors, speculation that drives up residential land costs in boom areas, volatile interest rates and the shunning of poor areas by lenders.

Seattle, which has no rent control, suffered a 24% decline in apartment construction in the 1980s, according to Downs’ study. Meanwhile, Los Angeles, with rent control, enjoyed a 14.7% surge in such construction in the 1980s. It bettered San Diego, which has no rent control and whose apartment construction increased 14.3%.

Driven in large part by the West Coast land boom, rents in both Los Angeles and San Diego have skyrocketed in the 1980s, according to the Joint Center for Housing Studies at Harvard.

The center found that, regardless of whether rent controls exist, rents in California have far outstripped inflation or minor increases in local family earnings. San Diego, California’s largest city without rent control, is the most expensive city in the nation with a median rent of $628, the center said.

Economists often argue that removing rent controls could increase the supply of housing and lower rental prices in the long run. But urban planners and sociologists often counter that low-income housing was abandoned by the free market years before rent controls were adopted in the late 1970s and early 1980s. In fact, low-income housing in California is built largely through government subsidies and intervention.

Moreover, according to a study on rental housing by Richard Appelbaum, chairman of the department of sociology at UC Santa Barbara, landlords “do not behave competitively” by lowering rents on long-vacant apartments as would be expected under natural laws of supply and demand.

He found that landlords will not lower rents until vacancy rates in a region climb to 8% or 10%--a rare condition that has not existed in most urban areas for many years.

HOUSING TRACK RECORDS

Figures below show the number of low-income housing units built or rehabilitated since 1986 by California cities with rent controls compared to the amount of low-income housing developed by cities without rent controls during the same period.

POPULATION MEDIAN INCOME NEW UNITS RENT CONTROL Los Angeles 3,400,000 $15,746 15,500 San Francisco 741,300 $15,864 3,600 Berkeley 106,800 $13,506 315 Santa Monica 97,200 $16,604 286 West Hollywood 38,400 $19,000 243 NO RENT CONTROL San Diego 1,060,000 $16,409 258 Glendale 161,900 $17,205 0 Pasadena 132,000 $16,298 72 Redondo Beach 56,075 $21,879 20 Manhattan Beach 35,300 $29,404 0

Source: City departments of housing or community redevelopment