October 30, 2018

by Tyler Longenbaugh

Proposition 10 stands to repeal Costa Hawkins, a brutal law that is in no small part responsible for our state having somewhere between a fifth and a fourth of the nation’s estimated homeless population. Costa Hawkins has made every single-family home, apartment, and condominium built after 1995 exempt from rent control (a price ceiling on rental costs) and vacancy control (a ceiling on the rent increase a landlord can charge after evicting an old tenant). This is the way of a system where profit is valued over human needs, where gentrification brings wealth and prosperity to a neighborhood, and prices out the tenants who might benefit from that wealth.

Basic microeconomic theory posits that any kind of price ceiling creates shortages. That a landlord will not be incentivized to maintain or even rent units because they cannot make a profit under the “equilibrium price” of supply and demand.

The problem is that basic microeconomic theory doesn’t necessarily translate to larger macroeconomic reality. Seattle, for example, went through a building boom, yet 26% of these units sit vacant, unaffordable to the people displaced by their construction. Meanwhile, the average rent on a two-bedroom apartment is around $2,800, and 47% of Seattle households remain cost-burdened (i.e. paying more than 30% of their annual income on housing).

Many of the folks arguing against 10 peddle a contradictory argument. They claim on the one hand that rent control prevents development by making housing an insufficiently profitable investment for builders. But simultaneously, they claim that this same affordability goal can be met by unfettered building, leading–or so they argue–to a massive drop in rents. If this argument was correct, Seattle wouldn’t see those kinds of vacancies.

Housing is too important to be left to the landlords

Let’s step back and look at the problem in more detail. The homelessness problem speaks for itself in San Francisco. Even among those with roofs, poverty runs rampant. A fifth of Californians are at or below the Supplemental Poverty Measure, which aggregates the cost of living, available benefits programs, and state income levels into a metric for determining resource access. This ties California with Florida and Louisiana as the state with the most widespread poverty. 54% of over 17.5 million renters in our state are “cost-burdened” by housing, spending 30% or more of their income; 73% of all jobs in California do not provide wages adequate to relieving this burden.

Our homes are not just shelters, they are anchors to schools for our children and jobs that we need to survive. If we cannot stay in our homes, we lose access to our community of friends and family. We may commute long distances to work, which has inevitable effects on our health and psychological well-being. Long commutes also increase our carbon footprint, which worsens global warming and accelerates climate chaos. If we cannot commute, we may lose our jobs, leave the state, or end up adrift in transiency.  It’s enough to make one sick, and the housing-insecure are three times more likely to experience mental health problems.

And of course, these burdens are not shared equally. 64.1% of black households in California are burdened by housing costs, along with 57.6% of Latinos. While black people make up just over a twentieth of the state population, over a quarter of them are homeless.

As if it’s not bad enough that we are recreating feudalism, through gentrification we are recreating segregation as well. Two-thirds of Californians believe that it is “very important” to work together across racial groups to create fair and equal policies, and yet our yearnings have been betrayed by the “invisible hand”—or indeed, the more tangible hand of a typically white, landowning class.

How gentrification drives rent increases

Your rent can rise due to a couple of factors. One is as a result of tangible improvements made to the building on the part of the landlord. The other is through a separate set of “public” improvements, funded by your tax dollars, which fill the potholes and add public parks and gardens.

Both kinds of improvements may lead to your rent going up. While the former may be valid, a debatable point, it’s clear that the latter is not. You have already paid taxes to make your neighborhood nicer. Why should you be expected to pay twice?

Yet landlords defend rent increases in this case because the new parks are attracting out-of-towners who want to eat at the new Asian fusion place just around the corner, and now you have Pier Ones and Blue Bottles and art collectives and warehouse dance parties popping up everywhere and why shouldn’t you have to pay a bit extra to live in such a nice place?

Between these two kinds of rent increase, which do you think leads to the reaping of enormous windfalls in this state? If you guessed neighborhood improvements, give yourself a cigar.

This is what gentrification is, and it disproportionately harms and displaces communities of color.

Rent control is an urgent need

If the market rent in California were to increase by five percent, around two thousand more people would become homeless immediately.

This crisis affects all of us, burdening the entire economy. It increases job turnover, carbon emissions, and ties up $90 billion dollars (6% GDP) in housing costs, missing construction investment, healthcare for a transient population, and the increasing criminalization of the homeless (p. 17-18).

One need only look at the donors to the “No on 10” campaign to feel a sour taste in the mouth. Imagine: real estate developers do not want to lose profit. And as much as homeowners might complain that Prop 10 is somehow unfair to them, I don’t see them volunteering to give up their mortgage interest deduction, which means that renters are essentially subsidizing homeowners.

The market has failed us yet again, and Proposition 10 is the first step in owning up to it.

It is established legal precedent that a landlord be guaranteed a fair return on their investment; rent control measures cannot impinge on this right. When you consider Prop 13 and the very low property taxes paid by so many landlords, it’s clear that the massive windfall from unregulated rent increases has produced a handsome return on these investments. Landlords will not be hurt by the passage of 10, and rent control is the quickest way for us to stabilize the housing market. It’s a solution that can be deployed immediately, unlike housing construction, which takes significant time and displaces renters while underway.

Rent control protects people, keeps them in their homes, and there are few other tools immediately available to us to defend against the predation of landlords.

Housing is a human right

I will now say what should be the least controversial thing imaginable:

Housing is a human right.

Housing is a human right. Just like healthcare, education, food, shelter, and safety.

There are 17 million vacant homes in America, more than enough to house everyone currently homeless. These units are either vacation homes, or they are kept empty under short-term, speculation strategies that emphasize “flipping” over long-term investment in rental income, as the latter is often less profitable. We have the resources to advantage everyone and decline to do so through artificial scarcity in the name of the “bottom line.”

Prop 10 will help create a California that lives up to its ideals of equality, fairness, and opportunity, and will reform by degrees a world mired in class distinctions, ethnic discrimination, and generational disadvantage.