Should We Also Get Rid of Costa Hawkins? By Frank Gallo
For the past few decades California has been suffering from a housing shortage; a shortage that has resulted in higher rents and increased homelessness.
When a tenant receives a drastic rent increase, he/she rarely has the option to move, because similar units for rent in surrounding areas cost probably as much as what the tenant has been asked to pay.
Even though hundreds of units have been built in the last few years; rents have gone up, instead of coming down. The construction of hundreds of units has done little to clear a back log in residential construction that dates back almost 50 years and amounts to a rental housing deficit of more than 500,000 units in California.
Local zoning regulation and environmental impact reports at the city and county levels limit residential construction. Every locality has a zoning map that needs to be reviewed frequently to reflect population growth. Unfortunately, most cities rarely do so and when they do, the zoning changes are generally limited by resident’s concerns in what is commonly known as NIMBY (Not In My Back Yard).
With those construction constrains in place, it is not a surprise that the rental supply has for years been insufficient to meet the rental demand.
Now, tenant advocacy groups want rent control measures in place to limit rent increases, as a way to provide tenants some measure of security.
Many of these groups go even further, asking for Costa Hawkins (a law limiting rent control) to be repealed so that Los Angeles and other cities with rent control will then have the option to expand rent control to newly constructed buildings.
Costa–Hawkins is a key State statute enacted to manage the power of California cities to regulate their rental markets. The act prohibits rent control on single family homes, condominiums, and any building constructed after 1995 (the date of the passage of the act). In addition, for cities with existing rent control, their rent control ordinances are limited to anything constructed before they passed their rent control law.
The California Association of Realtors, argued that getting rid of Costa-Hawkins would make the State’s housing shortage worse. “Rent control goes against economic laws, since it distorts the market and reduces supply.” As presented in a study released in 2017 by Stanford economists’, rent control prompts landlords to leave the rental market, resulting in a smaller supply of affordable rentals. There are at least 15 cities that have rent control in California including Los Angeles and Santa Monica.
Furthermore, apartment owners allege that “rent control is unfair since it makes the landlord absorb all the costs of providing affordable housing. It would, effectively discourage the ownership of rental units and reduce the demand for construction of new rentals.”
By removing Costa-Hawkins, cities and municipalities would be able to pass comprehensive rent control measures that could not only apply to single family residences and condos, but that would also apply to newly constructed units, effectively discouraging the building of new rentals. In essence the State Government would be buying the rental industry (new rentals would have to be provided by the State just like in any communist country).
Laissez faire, an economic principle, basically states that market forces solve economic problems. Unfortunately, the shortage of housing in California is happening chiefly for non-housing reasons. It is happening because of land use restrictions that discourage the building of new dwelling units.
As imperfect as Democracy might be, it is the best way of government that we know. The way to solve the shortage of housing is by reviewing land use restrictions, and permitting market forces to correct the shortage of housing. Promoting the creation of more restrictions and regulations would not only deepen the problem, but create additional problems.