Rent control conundrum

Jeff vonKaenel

Housing prices and rents in Sacramento are skyrocketing. People unable to pay their rent are living on the street or in a car or on somebody’s couch. With incomes creeping up only a few percentage points a year and with rents leaping up 10 percent a year, housing is becoming unaffordable for more and more people each year.

Something has to be done. On the state level, activists say they have enough signatures to qualify a ballot initiative that would repeal a state law known as Costa Hawkins that makes it illegal for cities to impose rent control on single-family rentals, condominiums or apartments built after 1995, or in some cases earlier (after a city adopted its first local rent control ordinance). Costa Hawkins also protects a landlord's right to raise rent to market rate when a tenant moves out. If this law is repealed, it opens the door for cities to establish broad rent control policies.

Here in the city of Sacramento, a rent control initiative is being circulated that would limit maximum annual rent increases for rentals built before 1995 to the consumer price index—currently around 2.5 percent, far less than the typical rent hike of around 10 percent. The measure would also create a nine-member rent control board, require landlords to pay an annual rental housing fee, and establish relocation assistance for displaced tenants.

While there is no doubt something needs to be done to rein in California's ever-increasing housing costs, is this the right solution?

It's obvious why home prices and monthly rents are going up. Jobs and the population of California are increasing fast—much faster than the number of new housing units. This supply and demand problem is dramatically escalating prices.

While rent control would be wonderful for those who are covered, it does not increase the supply of housing. In fact, the prospect of rent control could actually discourage developers from building rental units.

Rent control, as currently structured, benefits one group of renters at the expense of one group of landlords. The housing crisis also benefits those who own homes at the expense of those who do not.

Here in the Golden State, we need to increase the number of new rental units and lower the cost of building rental units. Here's how:

First, the way that Proposition 13 was written in 1978 has benefited commercial property owners much more than residential property owners. Reform Prop 13 by regularly reassessing nonresidential commercial properties. This would bring around $9 billion a year into state and local government coffers. This money could be used to reduce fees on development—that would encourage new rental units.

Second, change local sales-tax allocations so that cities and counties benefit from housing development instead of retail. Instead of auto malls and shopping centers, we'd start seeing more housing.

Third, stop giving out large tax breaks to corporations that bring in new jobs. Creating new jobs without creating housing to match makes the housing crisis worse. Why would a company want to relocate to a place where their employees cannot afford to live? Instead, creating housing will make Sacramento a more appealing location for employers.

We need to solve the housing problem. Let's do something that will work for the whole community.

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About the Author

Jeff vonKaenel
Jeff vonKaenel is the president, CEO and majority owner of the News & Review newspapers in Sacramento, Chico and Reno.