Angry residents face off with representatives of the nonprofit group PATH Ventures that is proposing to build an affordable apartment complex for the formerly homeless in Carson, during a community meeting in the Normandale Recreation Center in Torrance on Wednesday, September 12, 2018. (Photo by Axel Koester, Contributing Photographer)
Members of the Los Angeles Center for Community Law and Action lead a march through downtown Los Angeles in support of a county motion to enact a 3 percent rent cap for six months on some 50,000 apartments in unincorporated parts of the county. (Photo by Sarah Favot)
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Delma Flammia, left, and Danny Robley express their opposition to the proposed affordable apartment complex for the formerly homeless in Carson during a community meeting in the Normandale Recreation Center in Torrance on Wednesday, September 12, 2018. (Photo by Axel Koester, Contributing Photographer)
Construction continues on NoHo West, a new mixed-use lifestyle center at the current MacyÕs site on Laurel Canyon Boulevard at Oxnard Street in North Hollywood. The redevelopment will repurpose the existing MacyÕs building to serve office and retail uses, and incorporate a walkable main street retail concept and amenity-rich residential apartments.(Photo by David Crane, Daily News/SCNG)
Proposition 10 would change the rules for rent control. Its one of several high-stakes ideas California voters will weigh on Nov. 6. (Photo by Michael Kitada, Contributing Photographer)
A coalition of community organizations gathered outside City Hall to release a “Peoples Budget Proposal” in Long Beach on Tuesday, July 17, 2018. The group wants the City Council to fund initiatives for immigrant rights, language justice, safe housing and opportunities for youth. A counter group attended the press conference with signs against rent control and the two sides danced around each other trying to block each others messages. (Photo by Brittany Murray, Press Telegram/SCNG)
Supporters from at least a dozen housing and tenants rights groups rallied in downtown Los Angeles Thursday, April 12, in support of the repeal of the Costa-Hawkins Act and rent control measures in six Southern California cities. The 1995 state law limits rent control to older apartments. (Photo by Jeff Collins, the Orange County Register/SCNG)
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Honesty is the best policy and one can hope for frank discussions about how to solve Californias housing-cost puzzle.
So Im intrigued by how opponents of statewide Proposition 10 — the ballot measure that would allow (not mandate) more cities to enact rent control — are framing their objections.
I know economic theory strongly suggests rent control does not work well for certain tenants and most landlords. Price limits can restrict the motivation for most property owners to maintain or boost supply.
Assuming growing demand for rentals — or in Californias case, a pre-existing shortage — giving landlords any disincentive to grow their apartment stock could actually raise rents overall. Its Econ 101, as rent control opponents like to argue.
Or, as numerous attack ads say, Prop. 10 is the “anti-homeowner” initiative.
Basically, rent control opponents — led by real estate industry powerhouses — are appealing to property owners self-interest by reminding them what the loss of rent-pricing power might broadly mean. Real estates overall investment charm could be dulled. That may eventually lead to falling values for California rental units.
It could even hammer the value of homeownership properties.
I fully understand a property owners motivation to seek profits. And lets assume the No-on-10 folks are right. Its bad for real estate investments.
Then many property owners must ponder the economics of an alternative tactic for affordable housing proposed by many rent-control opponents: massive construction.
Increased supply of housing would give house hunters more options, taking away their urge to “buy now or forever be priced out.” Meanwhile, added competition for tenants should force landlords to cut rents.
Remember good ol Econ 101? Its not suspended for non-rent-control “fixes” to the states housing imbalances.
Boosting supply in any market lowers pricing. You know, it makes things more “affordable.” Cutting any investments cash flow and/or trimming the number of motivated buyers can dull the luster of any asset to current and prospective owners.
Just like rent control may financially injure many property owners, the California dream of significantly greater housing supply is particularly unfriendly to owners, too.
If there were more options for house hunters and renters, economic forces should translate to home sellers and landlords losing their pricing control. Yes, California could become a buyers (renters) market!
That doesnt mean property owners cant see the societal value to more affordable housing and the economic stability it can provide. Some landlords or homeowners might willingly trade lower values — or minimized appreciation — for a greater good. (I can hope, no?)
I am not endorsing rent control. Nor am I saying more housing construction wont increase “affordability of California housing. But since we are all talking honestly about housing challenges in this election season, lets be frank about what most affordable housing efforts are. And I dont mean just rent control.
“Affordability” proposals are anti-homeowner and anti-landlord.
Thats why, for all their pro-housing development bluster, homebuilders and apartment owners — and the financial forces that back their efforts — are by no means rushing every possible project to market. A swamped market is bad for their businesses.
Because, Econ 101 tells you, you cannot lower the cost of housing without cutting the price of housing.
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