Many of the legislators who supported it specifically cited this aspect of the bill, so I don't think such a change would make it through.
Any price control inevitably has negative consequences in the market. This is practically a law of economics.
> Its limited to buildings that are 15 years old or older, and it limits rent increases to 8% annually, which in practice is about 1 - 3% of all lease agreements in CA, a very small amount.
If it with have such minimal effect why even have it?
> Commercial construction loans are based on the 15 year revenue generating potential of the proposed building, this law was created specifically with that in mind so as not to interfere.
Then it's not as bad as it could be. Doesn't mean it's justified.
It may not seem justified to you, but to a low income family in a rapidly gentrifying area, it means everything.
And what is the magnitude of the consequences of this law? That’s what matters. It’s very small.
There is an exception: if the price ceiling is higher than the market price, then the ceiling will have no effect. It may be that the allowed rate of increase is high enough that it's an ineffective price control, in which case there would be minimal market distortion.
This enables a society to continue to grow and function at a somewhat more sustainable pace, letting cities and counties grow without intense boom-bust and crash cycles, with a more stable working class, and therefore a long-term sustainable housing construction market.
I understand that rent control is no grand solution, and that we need more houses built - but I do not understand how rent control is part of the problem.
The problem starts and ends with personal and corporate greed. The rent control is an attempt at constructing a sustainable, stable society from the ashes of an out-of-control capitalism that is leaving most of its consumers in the dust.
Rent control is not part of the problem and would not deter rational actors from building additional housing - I believe it would increase it.
- It makes it so new renters subsidize the old ones, raising prices for newly vacant places, defeating the purpose of controlling costs. It also doesn't offer tons of protection from boom/bust cycles, as mainly those riding the boom will be able to afford absurd prices in highly regulated places like SF — Where a 1br can fetch 3.7k/mo (!!)
- "FU, got mine" attitude disengages renters from organizing the same way NIMBY homeowners do. For example, SF renters could easily outnumber homeowners to allow much more housing to be built, but ~70% of housing stock there falls under rent control.
I do want to be clear that I fully support controlling costs in some manner, however, this desperately needs to be tied to a solution that results in more housing.
Rent control deters the creation of new housing. This reduce in supply raises the price, which is bad for the poor - exactly the people it is meant to help.
> Rent control deters the creation of new housing.
I keep seeing this repeated but I don't understand. Why does rent control deter creation of new housing?
> This reduce in supply raises the price
But you've glossed over why supply is reduced. I don't see any reason that supply would be reduced with basic moderate rent control like this one.
Edit: I have tripped some wire (?) and am not allowed to post any more. In response to the comment below,
> https://www.google.com/url?sa=t&source=web&rct=j&url=https:/...
That seems to be Washington, not California. According to http://www.hrc-la.org/doc.asp?id=36 it seems to read that some leases allow rent increases mid-lease.
I believe you might be thinking of month-to-month, which is not a traditional lease. On all fixed term leases over a month rent cannot be changed during the term of the lease.
If you have a lot of money and you want to build/buy a rental property, would you do it in a) a growing city with no rent control where your discounted future cash flows are unbounded or b) a city where there is a law placing a ceiling on your returns.
All else being equal, you are going to choose the city without rent control to build your new housing units in (or invest in something other than real estate altogether), thus illustrating how rent control disincentives new investment in housing, and specifically low-income rental housing.
> All else being equal
Okay but all else is not equal, and in the real world, it is never equal. These thought experiments do nothing to improve conditions in the real world, since they are based on flawed models of how people behave.
By that logic, nothing affects anything else and we should all give up trying to think or plan.
I think it is wise to produce better models with new information - not to ignore everything or to knowingly use false models. People do not - and should not - act according to those 'rational' ideas of maximum profit.
This is a good example of that. Rent control tends to benefit the older generation at the expense of younger people and families. It does nothing to solve the actual problem of lack of housing inventory.
The studies are clear, rent control is a benefit to a few but long term doesn't really add much value and instead makes the market stagnate in funny ways.
"Economists from both the left and the right have a well-established aversion to rent control, arguing that such policies ignore the message of rising prices, which is to build more housing. Studies in San Francisco and elsewhere show that price caps often prompt landlords to abandon the rental business by converting their units to owner-occupied homes. And since rent controls typically have no income threshold, they have been faulted for benefiting high-income tenants."
This is what would really help with the housing problem
"State Senator Scott Wiener, a San Francisco Democrat, offered a bill that would essentially override local zoning to allow multiple-unit housing around transit stops and in suburbs where single-family homes are considered sacrosanct. The bill was shelved in its final committee hearing this year, but Mr. Wiener has vowed to keep pushing the idea."
But the NIMBYs killed it for now https://www.nytimes.com/2018/04/17/business/economy/californ...
> This bill will provide millennials with some extra security so they know their rent won't be spiked and they'll need to move.
I'm not sure that's how rent control works. Unless I missed something, your rent is only capped if you don't move.