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California Gov. Gavin Newsom seeks statewide “rent cap”

California Gov. Gavin Newsom seeks statewide “rent cap”

Rent control has worsened the housing crisis, so California Gov. wants to expand it statewide.

https://www.youtube.com/watch?v=LZSxmyjKGEY

As I have posted often, the only law that is truly sacred in California is the one related to unintended consequences.

We have chronicled the continuing homelessness crisis in California and its severe public health consequences.

Now, in a deal touted to protect renters from being priced out of their rentals, California Governor Gavin Newsom and top Sacramento lawmakers have stuck a deal to create a state-wide rent “cap.”

The deal, which needs the approval of the Legislature in the next two weeks, would cap rent increases statewide at 5% plus inflation per year for the next decade, according to Newsom’s office. The legislation, Assembly Bill 1482, would also include a provision to prevent some evictions without landlords first providing a reason.

..The agreement represents a dramatic shift in the debate over whether tenants would see any new limits on rent increases this year, and represents a political risk for Newsom as he backs a highly visible bill not assured of passage.

Theoretically, a “rent cap” is different than “rent control.” However, the terminology change seems to be a political stunt to get around the fact that a rent control measure was soundly defeated in the November 2018 election.

The plan has the rent caps terminating in 2030. The cost of inflation would be adjusted regionally, so  there likely would be a different percentage in San Francisco than in the less prosperous Central Valley.

The California Apartment Association and other state-wide organizations indicate that they will not oppose the bill.

“Now we must get serious about moving forward on production, which is the only way we address our housing crisis,” Debra Carlton, senior vice president for public affairs, said in an email.

The California Building Industry Association is also neutral on the bill, Newsom’s office said.

“The bill will protect millions of renters from rent-gouging and evictions and build on the Legislature’s work this year to address our broader housing crisis,” Newsom, Chiu, and legislative leaders say in a statement.

Unless California ends burdensome requirements on construction and permitting, it is difficult to see how the rent “caps” won’t create the same kind of unintended consequences as rent “controls.”

Stanford University, hardly the bastion of conservative thinking, conducted a detailed study that show rent controls just don’t work.

“Taken together, we see rent controlled increased property investment, demolition and reconstruction of new buildings, conversion to owner occupied housing and a decline of the number of renters per building. All of these responses lead to a housing stock which caters to higher income individuals. Rent control has actually fueled the gentrification of San Francisco, the exact opposite of the policy’s intended goal.”

That’s quite the indictment of a policy long-favored by tenant advocates and politicians who expressly claim that rent control is the only way to ensure housing affordability and to prevent gentrification….

Furthermore, rent control activists are going to try to pass another measure in 2020 despite the defeat last year. Additionally, in a move that seems to suggest the politicians already know the “cap” is full of fail, Sacramento is fully embracing the concept of tent city living.

As homeless men, women and children in Sacramento wait for three new large shelters to open, another model that local officials have repeatedly rejected over the years is now quickly gaining traction.

The “safe ground” model – essentially creating an area where homeless people can live safely in tent cities or in cars – has not been a part of Mayor Darrell Steinberg’s homeless plan. Steinberg has instead been pushing hard for large shelters with rehousing services. But as the city enters its fifth month without a city-run shelter, other alternatives are now coming to the fore.

Councilman Jeff Harris was previously opposed to the “safe ground” model, along with most of the council aside from Councilman Allen Warren. Now, Harris is proposing the city open a temporary homeless camp similar to one Modesto and Stanislaus County opened earlier this year.

“To get from today until we stand up more shelter beds, which we desperately need, I suggest we take a look at the safe ground model,” Harris said.

Maybe we can all those tent cities “Newsomvilles”!

If you are planning to visit the Golden State, make sure you are up-to-date on your vaccinations and watch where you step.

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Comments

Rent control has also ruined several neighborhoods in NYC

“That trick never works…”

The dem guv hopes to repeal the Law of Supply and Demand. His next biggie will be to repeal the Law of Physics. Only in CA … the land of fruits and nuts.

    The Friendly Grizzly in reply to walls. | September 1, 2019 at 11:18 am

    California already is trying to change the laws of physics. Example: trying to get enough renewable energy to feed the state’s needs.

If you limit the amount of rent, then you limit the value of the property. In an indirect way it a government taking.
Limit the property value, you disincentives upkeep and repair.

    drednicolson in reply to rayc. | September 1, 2019 at 9:38 pm

    In the same way that minimum wage laws secretly hurt the poor. Limit the marketability of individual labor, you disincentivize ambition and excellence.

A little something for everyone here. The fact that neither builders nor rental unit owners object tells the story. If I could have increased my rents 5% a year plus inflation for the last 30 years I’d be getting double what I actually get on my rental properties! So the politicians have the support of the owners and builders and have fooled the public into thinking they are doing something for them.

Although the Supreme Court has ruled that local authorities have the ability to enact rent controls such as these, I cannot see how this is constitutional.
Essentially, the State is taking private property (rental income) from the owners and giving it to renters. This, of course, is done under the guise of “helping” renters.
What they are really doing is buying votes with money confiscated from landlords, by virtue of the fact that there are thousands of times more tenants than landlords.
If housing prices are really causing a “crisis” , which I doubt, the solution is not to confiscate property from owners without due process and give it to renters.

    alaskabob in reply to johnny dollar. | September 1, 2019 at 11:58 am

    The cost of keeping California “affordable” means capping everything but government. The road to serfdom may have a cool coastal Pacific breeze for now but will end up in Death Valley.

Progressive learn nothing and forget nothing.

It’s already too expensive to build housing in California urban areas, so let’s reduce future income from that housing that isn’t being built in the first place. Genius.

Newsom could always work with ICE to deport the millions of illegal aliens in California. That might provide some housing relief to citizens.

The Friendly Grizzly | September 1, 2019 at 11:19 am

He makes Moonbeam look sane.

I always bother the millenials in Portland by telling them that their support of illegal immigrants is responsible for about $300 of their monthly rent which is excessively high due to increased demand. They are the source of their own problems, and I feel it is my duty to educate them to that fact. Show me a sanctuary city with low rents and I will gladly retract this assertion.

Yeah, thats always worked in the past. NOT

Brilliant, just effin brilliant. Treat the symptom not the disease. Then wonder why things got worse. Repeat.

Well, that should increase the construction of apartment buildings. //

5-6 million illegals live in CA. In rental units. Rental units built for legal residents.

This is a case in which Oregon insanity has migrated south to California, except that CA has one upped us.

The Oregon legislature recently passed a similar bill limiting the rent increase to 7% plus inflation. The Rental Owners’ Association didn’t fight it here, either, hoping to stave off something worse. That won’t work. Look for the cap to drop to 5% in the next legislative assembly.

OnTheLeftCoast | September 1, 2019 at 4:27 pm

Incremental confiscation of private property. Because the inevitable worsening of the housing crisis was done With All the Best Intentions™, when things get even worse there will be nothing for it but a public private partnership like MediCal where the state pays and private companies manage the decline for profit… which will in turn prove that capitalism can’t solve the problems, so Something Better Must be Done. Or else.

I think conservatives should do a petition to enact a wealth tax on the super rich in California. 5% of total the total wealth over a million dollars (I know it’s not super rich, but the Californians who vote will think so). For the illegal aliens or homeless funding. Whatever flavor of stupid is hot at the moment there.
Might as well push the taxes up as high as possible and then double them. Maybe, and this is a huge MAYBE, the brain addled Californians will finally decide to end their socialist paradise.
But if not, well at least the rest of the country will be able to laugh and hopefully decide they don’t want any of that kind of stupid in their state.

    tommy mc donnell in reply to 4fun. | September 1, 2019 at 10:06 pm

    yep concentrate more money in the hands of the politicians. no way that will ever work out badly for the working people.

tommy mc donnell | September 1, 2019 at 10:03 pm

rent control has worsened the housing crisis, so California gov. newsom wants to expand it statewide. exactly, newsom wants to expand a policy that has been successful in helping to destroy the country. it is a communist’s job to destroy the existing order. newson’s job is to destroy California. conservatives will figure that out about the time they are forced to sing the international instead of the stars bangled banner.

Subotai Bahadur | September 2, 2019 at 2:13 am

Fortunately it is happening in California and not in America./ limited sarc.

I am really glad that my daughter and her husband moved their company out of California.

Subotai

I read an interview a few years back … Guy was owner or CEO of a regional burger chain ( Whataburger ? )… He said they have pretty much given up on new construction in Cal… He said it takes months or in some cases years just to get through the permitting process … And that’s with a team of lawyers … He added that it seems like they work against and do not want his business there … Texas he said in 60 – 90 days I can be done with it and putting burgers out the window and in Texas they act as if they want you there and that your not a enemy of the state

    redc1c4 in reply to Aggie9595. | September 2, 2019 at 12:13 pm

    pretty sure that was Carl’s Jr/Hardies…

    no Whataburgers here, AFAIK.

    and fewer Carl’s, for that matter. several in my general area have closed recently.

Why stop at rent? Lets put price caps on property as well. Oh, and tax caps too. Can’t have poor people paying more taxes than they can afford. Wait…. the government being asked to contain its spending? That’s unamercian.

Here is an analysis of a group of studies of various Rent Control programs

Here are the key findings:

1 . Rent control and rent stabilization policies do a poor job at targeting benefits. While some low-income families do benefit from rent control, so, too, do higher-income house- holds. There are more efficient and effective ways to provide assistance to lower-income individuals and families who have trouble finding housing they can afford.

2. Residents of rent-controlled units move less often than do residents of uncontrolled housing units, which can mean that rent control causes renters to continue to live in units that are too small, too large or not in the right locations to best meet their housing needs.

3. Rent-controlled buildings potentially can suffer from deterioration or lack of in- vestment, but the risk is minimized when there are effective local requirements and/or incentives for building maintenance and improvements.

4. Rent control and rent stabilization laws lead to a reduction in the available supply of rental housing in a community, particularly through the conversion to ownership of controlled buildings.

5. Rent control policies can hold rents of controlled units at lower levels but not under all circumstances.

6. Rent control policies generally lead to higher rents in the uncontrolled market, with rents sometimes substantially higher than would be expected without rent control.

7. There are significant fiscal costs associated with implementing a rent control program.

Oops!

Here is the link to the study:

https://www.nmhc.org/globalassets/knowledge-library/rent-control-literature-review-final2.pdf

The short version is what you already knew:

Rent Controls don’t work.

    tommy mc donnell in reply to Hodge. | September 2, 2019 at 6:24 pm

    “rent controls don’t work.” oh but they do! someday conservatives will wake up to the fact that people like gavin newsome want to destroy this country not make it better. rent control’s purpose is to make housing unaffordable. it works like a charm. you have to tear this country down before you can build it back up again.

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