Rent Control: The Battle Is Not Over

Despite Prop 10 failing this November, leaving the Costa-Hawkins Rental Housing Act to stay, the fight to prevent rent control in Sacramento remains. Rent control continues to be an active topic of discussion and possible policy to be voted on in 2020, as the Service Employees International Union (SEIU) has drafted an initiative establishing rent control in Sacramento. This proposal would create an elected Rent Stabilization Board with no limit on the amount of money those elected can earn on said board and no limit on campaign contributions they can accept during their campaigning for these positions.

Their primary purpose would be to oversee that this measure be properly implemented, as well as establish regulations and determine allowable annual rent adjustment. However, the first rent board will set unlimited fees on landlords in order to fund the board’s operating expenses.

We are experiencing a housing crisis, and rent control won’t build one single new unit of housing, or lower anyone’s rent. It will cause housing shortages and decrease the development of new real estate projects, all while costing individuals and the city a fortune in fees, operating costs, and tax revenue loses. Rent control damages the market value of controlled rental property, which ends up decreasing property tax revenues. This has a negative impact on both landlords and the city; many cities are losing tens and sometimes hundreds of millions of dollars in tax revenue a year.

The solution to the State’s housing problem is to incentivize and speed up construction of housing units available for all income levels, which is more efficient to create more low-income housing and lessen housing shortages. Economists on both sides of the political spectrum agree that rent control harms the quality and quantity of available rental housing, and harms future development. Landlords are not motivated to keep their rentals in the best shape possible when rent control is in place because they are being limited in what they can charge tenants and can lose funds they would have otherwise allocated to renovations and upgrades. This also means they have less capital to spend on maintaining general upkeep, causing an overall deterioration of rental housing.

The added procedure of establishing rent control would also add significant cost to Sacramento and its consumers. With this ordinance, every rental property and landlord would need to be registered, which would take large amounts of money, time and manpower. This is just to begin implementation, without considering the fiscally detrimental annual operating costs for the Rent Stabilization Board to simply function as proposed. For example, in Santa Monica in 1996, it cost $4 million to control rent for just 28,000 units. It is anticipated that an elected rent board in the City of Sacramento would require at least 20 new city employees, in addition to the elected board members. Considering the costs of administering rent boards in other cities, we anticipate a rent board in the City of Sacramento would likely cost $5 million per year. The rent board will determine how much landlords are allowed to raise rent between the 2% and 5% limit set in the ordinance. The rent board will have the power to lower rent for specific tenants if they deem it necessary. The rent board will oversee disputes between landlords and tenants, and will have the power to subpoena personal information and emails as they determine necessary. In the event a landlord must pay a tenant relocation fees, the rent board will determine the exact amount of relocation owed from the landlord to the tenant, and can increase those costs outlined above as the rent board deems necessary.

Rent control does not create more housing, or help generate more lower-income housing opportunities. It would generate huge losses for the city, which in turn are losses for those who live in Sacramento. Because this would cause a shortage in available housing, this ordinance would likely cause rent increases in neighboring cities because people would be forced to look elsewhere for living space. Another elected body is not the answer; it’s expensive, inefficient, and creates more barriers for the problems attempting to be solved. Stay tuned for more information; SAR will be following this closely and will keep you updated.

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