Stop It Because There's No Going Back

Whenever prices rise rapidly in an important market (e.g., housing, medical care, gasoline) one may expect to hear a call for price controls. And so it is that five midsize Bay Area cities, Burlingame, San Mateo, Mountain View, Alameda, and Richmond have rent control on the ballot on November 8th.

At the root of the issue is that there isn’t nearly enough housing for all the new jobs. Between 2008 and 2015, the four counties that make up the heart of the region added 400,000 jobs, while permits were issued for just 86,000 new housing units.

Rents for an average apartment in the San Jose region have jumped 37% in the past five years to more than $2,700 a month, according to research firm Axiometrics.

Rent control has been debated in the United States for nearly one hundred years, and I'll spare you, dear reader, a rehashing of the arguments pro and con (I'm con, by the way, though I do have sympathy for and would like to help some renters).

There are some significant exemptions in the San Mateo proposal:

Single-family homes, condominiums and owner-occupied duplexes as well as [those with secondary units where the owner occupies either the primary or secondary unit] are exempt from the proposed law.

If approved, the law would not apply to any future developments or new housing. Per the Costa-Hawkins Act, all apartment buildings constructed after Feb. 1, 1995, would not be subject to the proposed rent stabilization measures; however, residents of existing multi-unit dwellings would receive protection against being evicted without cause.

Despite its limited applicability, these initial rent control measures are the camel's nose under the tent. Rent-control bureaucracies will be created, and regulations will be issued. From historical experience bureaucracies and regulations only expand and never go away.

The examples that engender the most sympathy--elderly and/or disabled renters who are "marked to market" after their leases expire--deserve help. It's far better to render means-tested assistance directly to these groups than to promulgate rules to a diverse and dynamic market (For example, rules will limit rent increases on some tenants who are wealthier than their landlords).

Besides, there are signs that a real-estate slowdown is approaching.