More rent control will only exacerbate Oxnard’s housing woes
Tonight, the Oxnard City Council will discuss the critical problem of housing affordability. Thanks to our high housing costs, Stanford and PPIC estimate that one in four residents of Oxnard and Port Hueneme are in poverty, one of the highest rates in California.
The meeting will focus in particular on “A Review of Rent Control and Tenant Protection Strategies.” This emphasis follows efforts by the nonprofit CAUSE to reduce allowable rent increases in Oxnard from the state limit of inflation + 5% to inflation + 0%.
Both economic theory and evidence indicates that this additional rent control will not help, and could in fact worsen our housing situation. There’s no shortcut: we need to allow more housing development and/or give people money.
Economic theory holds that housing costs derive from supply and demand. As a first order effect, rent control changes neither, it only pushes landlords to charge more for new rents to offset future inability to charge market rents. Theory also suggests that, because rent control reduces rental revenues, it will lower valuations and investment in rental housing, thereby reducing supply. Of course, rent control also discourages renters from moving.
Evidence backs up the theory, indicating that rent control would do the following in Oxnard:
- Raise housing costs for immigrants. (Stanford)
- Discourage new construction (California Legislative Analyst’s Office)
- Reduce the quality of rental housing (RAND and Census Bureau)
- Lower property tax revenue (MIT)
- Increase homelessness (MS State)
- Lengthen commutes, adding to pollution and carbon emissions (CSUN)
- Worsen matches between where people live and where they want to live (Harvard)
- Favor more affluent families in the rental market (California Legislative Analyst’s Office)
All of this explains why, in separate polls from 1992 and 2012, over 90 percent of economists assert that rent control has not had a positive impact on the amount and quality of affordable rental housing.
If the empirical consensus is strongly critical of rent control, it’s even more strongly supportive of legalizing housing. A study of Helsinki’s housing market released last month found that “The supply of new market rate units triggers moving chains that quickly reach middle- and low-income neighborhoods and individuals. Thus, new market rate construction loosens the housing market in middle- and low-income areas even in the short run.” This is just the most recent in a large body of research arriving at the same conclusion.
To the extent that Oxnard is willing to spend public dollars (as rent control would require, given the negative impact on property tax revenue), we could do so directly on cash transfers, which would have substantial impacts on housing affordability, homelessness reduction, health outcomes, and in particular children’s educational and developmental outcomes.
Oxnard has many tools in its arsenal to make housing more affordable. We could revise our Housing Element to exceed our RHNA target, legalize fourplexes citywide, remove parking mandates near transit (or citywide), raise height limits, and so on. We could conduct a guaranteed income pilot, or create a baby bonus or child allowance. Each of these policies would protect tenants by giving them more options to afford housing, without locking either them or the landlord in to an unwilling relationship. Let’s not distract ourselves with counterproductive measures like rent control.