California’s housing crisis is severe and growing. Millions of households — not just poor families but those with incomes higher than the U.S. median of $59,000 — pay half or more of their earnings for shelter. The extreme cost of housing is why the Golden State — in many ways the thriving hub of the global tech economy — nevertheless has the highest effective poverty rate in the U.S.
There is no mystery as to why this is happening. It’s Economics 101. When there are shortages of a commodity, its price goes up until new supplies create a new equilibrium. Yet the reaction in many local governments has been to use rent control to address the symptom of the problem — higher housing costs — instead of the problem: a lack of supply. This is done even though the evidence is overwhelming that the approach — while creating short- and medium-term relief for many renters — either quickly or eventually worsens the problem by diminishing the quality and quantity of new construction and leading to other negative unintended consequences such as stifling apartment rehabilitation, shifting apartments to condominiums, hampering property tax revenue growth, encouraging rental discrimination and illegal subletting, and even increasing homelessness. Inviting these sorts of problems, Los Angeles, San Francisco, Oakland and a dozen other cities embraced rent control — unlike San Diego — during California’s explosive population and economic boom after World War II.
Now, that history is being ignored by many Californians — perhaps understandably by the renters who feel battered by rent hikes, but much more opportunistically by politicians who prefer posturing to the much tougher work of eliminating obstacles to new housing construction. This November, Californians will almost certainly consider a related ballot initiative that readily gathered nearly 600,000 signatures. It would repeal the 1995 Costa-Hawkins Rental Housing Act, a state law which banned rent control for all housing built after 1995 and for single-family homes, condos and duplexes.
The disappointing renaissance of the California rent-control movement — and its championing by smart politicians like L.A. Mayor Eric Garcetti, who should know better — threatens to undo the progress the state has finally made at the behest of Gov. Jerry Brown. Last fall’s enactment of Senate Bill 35 — which makes it far more difficult to block properly zoned projects with affordable housing components — amounted to a landmark recognition that adding housing stock is the only realistic long-term way to address the housing shortage. This progress should be built on — not abandoned in favor of bad policy.
The shocking extent of poverty in California and how it fits in the larger picture of a nation plagued with income inequality demands an effective, thoughtful response from our leaders. Making it easier to add housing stock should just be one response. Overhauling our public education system to emphasize courses that yield 21st-century job skills is another. Making it much easier for older workers to get such training is also an obvious idea.
But for Californians to embrace a housing policy with a history of masking problems instead of addressing them isn’t just short-sighted. It’s dumb.