There has long been a debate surrounding the pros and cons of rent control. San Francisco landlord Anne Kihagi has consistently advocated that rent control has had a negative impact, not just on landlords, but tenants, as well – and there’s plenty of evidence to prove it.
A 1985 study by Peter Navarro in Cambridge, Massachusetts, found that when rent control was expanded in 1970, “roughly 10 percent of the city’s rent-controlled housing stock was converted to condominiums and moved out from under the grasp of the ordinance,” per Public Interest. Interestingly, the reversal of these controls in 1995 boosted both property investments and housing quality.
A similar phenomenon occurred in California between 1980 and 1990 in the rent-controlled cities of Berkeley, Santa Monica, West Hollywood, and East Palo Alto, all of which had required rents to remain stagnant even after a unit was vacated; in this time frame, rental occupancy declined 5.9%, while adjacent cities without such restrictions saw a 2% increase. A San Francisco study found that, while it benefited those in the controlled units, rent control overall “reduced rental housing supply by 15 percent, causing a 5.1 percent city-wide rent increase.” Therefore, although rent control was enacted with good intentions, it’s become clear that its biggest effect has really been increasing the wealth disparity, making it more difficult for more people to meet the steep city-wide rent increases.
In examining these studies, it’s no surprise that San Francisco suffers from a severe housing shortage, particularly rentals. San Francisco has upheld rent control since the late 1970s/early 1980s, along with other “legacy” cities like Los Angeles, Berkeley, and Santa Monica. Now, even more cities, including others in the Bay Area, are joining the rent control bandwagon. Of California’s 482 municipalities, 15 jurisdictions—which together represent roughly 20% of the state’s housing units and 25% of its rental units—have passed some form of rent control.
These cities are effectively discouraging the change and rental turnover that are essential for a dynamic housing market, as those who can afford to move will never want to surrender their “bargain” unit to someone who actually needs it. In other words, if the same tenants are staying in their rent-controlled units forever, then rent control is not accomplishing its goal of providing affordable housing to the greater population. A Google employee making over $150,000 per year can lease a rent-controlled unit in San Francisco for convenience, even if they can afford to live in a market-rent apartment or purchase a home further from downtown. Many millennials, however, are realizing that they can live in cities like Sacramento and Oakland and achieve a better quality of life, which also frees up rent-controlled units, and raises rents for the landlords to maintain these old buildings which Ms. Kihagi believes present a danger to the city as many are in poor condition.
And while San Franciscans continue to entrench themselves in the myopic dream that they can only live in San Francisco, a prior tenant – a housecleaner by trade – bucked the trend and bought a modest house in Las Vegas for less than $200k. What’s different about Las Vegas real estate? It’s up a whopping 15%, which means that this immigrant family’s hard-earned down-payment of $20k has increased in value to $30k, and the family now has a nest egg of $50k. Beyond the financial bonus, they’re also enjoying the physical comforts of a three-bedroom house, instead of squeezing a family of five into a one-bedroom rent-controlled unit as they had in San Francisco.
Let’s be clear: the goal here is not to eliminate rent control. Rather, the idea is to use this housecleaner’s story to inspire San Franciscans to broaden their dwelling horizons. Homeownership is possible for many more long-term tenants than would like to admit it, and if they are willing to expand their worldview and put in the work, there just might be a few more rent-controlled units on the market for those under financial pressure, increasing all parties’ quality of life and enlivening the San Francisco real estate market once again.
For more information on Anne Kihagi and West 18 Properties, visithttp://annekihagisf.com/
