California’s Toothless Statewide Rent Control Law

Suppose you were a progressive rent control advocate, and suppose you were an idiot — but I repeat myself. California‘s legislature, now in full thrall of the loony left, has lately passed a statewide rent control law, with all the predictable consequences thereof:

Economists and other policy experts have long criticized rent control for reducing the supply and quality of rental housing in the long-run. California's rent control bill is no exception says Michael Hendrix, state and local policy director at the Manhattan Institute.

"What we are going to get is a reason for landlords to convert apartments to condos," says Hendrix. "The net result of that is potentially more units being taken off the market, and long-term this housing crisis getting worse, not better." Hendrix argues that landlords, when faced with limits on how much they can raise their rents, will simply take their rental units off the market, converting them into condominiums that can be sold at market price.

A study of rent control in San Francisco published in the journal American Economic Review this month found that "while rent control prevents displacement of incumbent renters in the short run, the lost rental housing supply likely drove up market rents in the long run, ultimately undermining the goals of the law."

Economics? Bah, say the progressives who imagine themselves smarter (or at least more virtuous) than landlords. Gavin Newsom cashed in on that sentiment when he tweeted his support for the measure:

Nearly a third of CA renters spend more than 50% of their paycheck on rent.

We need change.

We’re bringing the strongest protections and relief in the nation:

- A cap on your rent.
- Protections against evictions.
- Access to legal aid $$.https://t.co/ce7K0Dru0g

— Gavin Newsom (@GavinNewsom) October 9, 2019

Of course, what makes this interesting is what precipitated the measure: rapidly rising rents. The bill caps increases at 5% plus inflation. So, how fast was rent rising in California overall? I looked at my former home turf of Orange County, and found this:

So, if we look at the Orange County figures as typical (they probably aren’t, the slope on the other two markets is slightly higher, and the LA County figure is about 31%), amortizing this backwards over the eight years covered in this graph, the annual average rent increase is 2.5%. In steeper Los Angeles County, the average annual rent increase is 3.8%. All of which is to say, the rubes have been conned again, just as they were in Oregon, which has a crazy high 9.9% annual rent increase limit.