The Case for Ending Rent Control

In the political pantheon of left-leaning San Francisco, Joan Holden is an icon of radical respectability. Since 1968, Holden has written 30 anti-capitalist plays for the Tony Award-winning San Francisco Mime Troupe. Last year's offering, City for Sale, satirized greedy developers and gentrification of the city's Mission District. As an artist-slash-housing activist, Holden has long been an advocate for rent control laws, which limit the amount of rent a landlord can charge tenants.

Holden says San Francisco's rent control ordinance should be broadened to cover all residential buildings, including live-work lofts, which currently are exempt from such controls. She has but a single demur to the enactment of stronger rent controls: She says landlords should be allowed to pass on the costs of capital improvements to tenants. A ballot initiative coming before local voters this fall would ban such capital improvement "pass-throughs"; Holden says the ban would be unfair to landlords, even "draconian."

Holden the rent control advocate is also, it turns out, Holden the landlord. She owns and operates a four-unit apartment building in the Mission District. She also recently applied to city government for permission to pass through $110,000 in capital improvements of her building to her rent-controlled tenants.

In some ways, Janan New is Holden's political mirror image. New is executive director of the San Francisco Apartment Association, a lobby for small- and medium-sized landlords. She opposes rent control, calling it a failed social policy. She blames the current "obscene" rents in San Francisco on governmental tampering. She says rent controls screw up the supply-and-demand mechanism that regulates prices in a capitalist economy. And, she opines, anti-landlord measures on the fall election ballot will blast rents into outer space and drive the middle class out of San Francisco.

New, however, will be staying in town. She owns a house, which, for a conservative who believes homeownership is a key part of the American Dream, is hardly unusual. But New was able to save money to buy her home by living in rent-controlled apartments for 17 years. "I am a firm believer in the free market," she explains, "but I needed a place to live."

In San Francisco, the debate over rent control is often more about emotion and ideology than study or impartial analysis. Most San Franciscans have a personal stake in rent control, one way or the other, and self-interest has its way of breeding ardor, spin, and outright hypocrisy.

The good and bad effects of rent control have, however, been studied nearly to death by a broad spectrum of public policy economists. The nearly universal verdict on rent control is that its mild forms can be beneficial to some renters, but that more stringent forms -- such as the form that exists in San Francisco -- create shortages of housing and high rents that harm tenants, especially the poor ones whom rent control was designed to protect.

In a political backlash against the economic downside of rent control, most jurisdictions that have experimented with it have in turn outlawed it. In San Francisco, however, a significant majority of voters live in rent-controlled dwellings and have -- in their minds -- transformed what was originally intended to serve as a temporary price control into a sacred right.

Politically powerful tenant activists claim that the economic law of supply and demand does not apply to the housing market, at least not in San Francisco, because, they say, with precious little proof, "infinite" numbers of people are ready to move here, if housing is built. An alliance of tenant organizations and neighborhood groups is working to pass laws that would further limit the development of commercial and residential space, on the unusual theory that a lack of supply will somehow reduce demand.

Scientific studies, government reports, and dozens of interviews with experts and players on both sides of the housing question, however, show that San Francisco's housing shortage and the high residential rents it has created are the result of two major factors: political impediments to housing construction and rent control itself.

In the thick of the debate about living space, the Board of Supervisors is commissioning San Francisco's first-ever study of rent control. It will take a year to complete, and, because rent control is the third rail of S.F. politics (much in the way that Social Security is the dangerously electrified issue on the national scene), there is no assurance that the study will lead to significant changes in San Francisco housing policy.

But there is clear need for change. Thousands of existing apartments have been withdrawn from the market, construction of new rental housing is severely restricted, and rents continue to reach for the stars.

Not in spite of rent control, but -- as history has proven -- because of it.

It was 1979. Elvis was dead. Disco was king. A weird mixture of inflation and recession -- called stagflation -- was so wracking the U.S. economy that Ronald Reagan was able to base his presidential campaign on a promise to address the crisis through an untested set of policy initiatives known collectively as supply-side economics.

In the spring of that year, San Francisco landlord Angelo Sangiacomo abruptly raised the rent on 5,000 middle-class tenants. Renters across the city revolted, organizing themselves to put a strict rent control ordinance on the fall ballot. Then-Mayor Dianne Feinstein and the San Francisco Board of Supervisors pre-empted the tenants' initiative by quickly enacting rent controls that were more moderate than the ones headed for the ballot.

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Carol Siegel
Carol Siegel

All very interesting -- and one sided. Here's a perspective from someone who has lived in rentals all her life, many in San Francisco. Before rent control in San Francisco, landlords abruptly raised rents to whatever they thought they might be able to get. Once my rent went up $400 in one month. This usually caused financial crises for tenants who had to scrape together or borrow the money to move immediately. Many became homeless. Tenants did nothing to improve our apartments or even maintain them because as soon as we did anything to make the place more attractive or comfortable and the landlord got wind of it, he would raise the rent substantially, knowing he could now get more for the place. As a result San Francisco was filled with crumbling, unsafe, awful looking apartments. (Those same apartments are now attractive because tenants can improve them and remain there at the same rent. Every time I come home to San Francisco I visit many places I and my friends rented and it's the same with all of them, they are in much better condition than they were prior to rent control because they are now the permanent homes of the tenants who live there, and they take pride in them.) Does no one but me remember the 1970s? The same situation as San Francisco in the 1970s is now the case in Portland, Oregon where I live (because of my job, not the housing). Apartments are generally in very poor condition as everyone fears the rent raises that follow improvements made by the tenant at the tenant's expense. The "eviction without cause" law makes sure that tenants will have no protection from these rent raises. And is Portland a heaven of wonderful, unregulated available housing? Hell no! We have one of the lowest vacancy rates in the US. Most new construction of apartments is also terrible. 270 sq ft studio apartments, 400 sq ft one bedrooms, shoddy construction, nasty rooms without windows, places that most middle class homeowners wouldn't allow a dog to live in. At rents rapidly approaching those that are unregulated in San Francisco! Statistics on rents in Portland (and elsewhere) are deceptive when compared to San Francisco's. Yes, there is affordable housing here, but it's almost all in remote suburban areas without adequate bus or light rail service. According to the US government and AAA owning and operating a car costs about $8,000 a year more than using public transportation. In most San Francisco neighborhoods it is possible to live without a car. In Portland's comparably served neighborhoods the average rent for a 600 sq ft apartment in decent condition (if you can find one) is now $1400 a month, including the new "utilities fee" (covering water and garbage service only) that landlords tack on in order to advertise the rents as lower than they actually are. Look at the difference between the pay scales in S.F. and Portland and you'll see what this means. I agree that rent control doesn't work well for landlords. Most landlords want to buy a building, milk all the money they can out of it as it decays from neglect, and then flip it as soon as the real estate market rises. Rent control interferes with their ability to ruin cities to serve their greed. If San Franciscans, most of whom rent, believe the realtors on this issue, then The City is no longer the smart place I remember! Rent control makes it possible for tenants to treat their apartments as homes, to invest in them, care about them, and care about the neighborhoods.

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