By Timothy L. Coyle
Consultant specializing in housing issues
Monday, April 30th, 2018
State housing activists recently came to Sacramento to celebrate a special achievement of theirs. They gathered on the steps of the Capitol to announce they had a solution to high housing costs in California: a repeal of the law which prevents statewide rent control. With the blessing of voters this Fall, they expressed the hope that a just-qualified initiative would deliver on that promise.
By preventing rents from rising to their short-term market-clearing level, stringent rent controls distort the resource-allocation signaling function of the price system. Specifically, stringent controls prevent owners from reaping the profits that would trigger the development of additional new rental units. Instead, owners often receive below-normal profits because controlled rents lag behind true total operating costs, including debt service. As a result, developers and investors are discouraged from building new rental units. This prevents the expansion of the overall rental housing supply needed to cope with the higher demand that stimulated rising rents.
Read More: http://www.foxandhoundsdaily.com/2018/04/rent-control-not-answer/
