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Rent Control – Does It Actually Work? – The Answer Is No

Average Rent In Stockton CA – July 2016

By RPM Central Valley

Rents are literally sky rocketing across the United States, especially in parts of Northern California and Southern California but should rent control actually be considered as a long-term tool for slowing down ever increasing rents? The answer to this question is no.

Why Rent Control Doesn’t Work

Although rent control is often championed by many people as being a solution for slowing the fast-paced growth of rent nationwide the reality is that it almost always has the exact opposite consequence of making it even harder for renters to find properties to rent.

Why?

Rent control slows down development because the average builder doesn’t want to develop rental properties in areas where they cannot get a fair market rent and this means that with fewer available rental properties on the market it will get even harder for people to find places to live.

Reduction of housing supply is an outcome of controlled rent. In fact, a 1981 study concluded that rent control caused a decrease in the housing unit supply. Because of the said restriction, businessmen chose not to invest their capital in locations that impose rent control, thus significantly lessening the construction of residential housing units. Aside from reduced housing construction, the Ellis Act in California permits landlords to permanently withdraw their rental units from the market. As a result, tenants have fewer options in finding houses to rent.

What’s the Solution to Rent Control?

If rent control is not an adequate long term solution then what’s the alternative?

The alternative to rent control is simple, more supply must be built to keep up with the demand for rental housing and to make this happen cities must do more to ease the regulatory burden on businesses so that they can get rental housing built knowing that they will be able to get a fair market rent for those properties.

Will this ever happen? The reality is that it’s anyone’s guess because most cities, especially those in California, seem continually stuck between the struggle with needing more housing and bureaucracy.

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For affordable property management in the Central Valley contact RPM Central Valley today by calling us at (209) 572-2222 or click here to connect with us online.

 

Rent Control