One of the hottest topics facing City Council currently is “rent control,” which surfaces periodically as a solution to the relatively high cost of living in a city where demand for affordable housing has traditionally out-paced supply. Due primarily to our high-functioning Housing Authority, Santa Barbara actually does enjoy a relatively high percentage of dwellings made affordable by covenants and subsidies. The demand, however, persists.
Solving the issue with the one-pronged approach of demonizing property owners and landlords as the cause of this phenomenon is neither fair nor practical, as a recent writing in another paper pointed out. And the result of these programs has been played out in cities all over the world to the eventual detriment of the rental-dwelling market and thus the tenants.
The latest scheme proposing capping rent increases at 60 percent of CPI (Consumer Price Index) does not take into account realities of inflation, utility costs, price and availability of insurance, and it may not cover annual property tax increases. Lastly, it disproportionately punishes structures built prior to 1995, which, while aging and prone to needing repair, provide a major source of below-market opportunities for tenants.
Santa Monica, a city almost identical in population to ours, runs a rent control program at the cost of $6 million, and finding an affordable unit there is no slam dunk. Where would we find that money?
Artificial market mechanisms, preferred by politicians as a panacea for socio-economic issues, are rarely successful in the long run and have unintended consequences. Price supports, wage floors, rent caps, and, my new favorite, tariffs, are all actions that gain political favor but result in adverse consequences down the line. A very real example of that is AB 1482 which caps rent at 5 percent plus CPI. The result has been rents increasing at about 10 percent per year — not out of “greed” but for fear of losing base value, an unintended consequence based on uncertainty.
Voters in California, including within the City of Santa Barbara, voted against Prop 33, which would have made it even easier for localities to increase the scope of rent control. A majority of voters understand the concept that rent control is simplistic, reactionary, and historically unsuccessful. Socializing a private asset in the name of the “Greater Common Good” goes against the grain of this country, and it diminishes the notion of individual achievement.
Solutions to Santa Barbara’s housing issue may be elusive, but there are mechanisms that don’t place the burden squarely on one element of the private sector. The previously mentioned Santa Barbara Housing Authority leverages tax-credit financing to produce units, state programs allow bonus density for the production of deed-restricted units, and the Average Unit Density (ADU) program inserts smaller units into the housing stock to provide more opportunity. Some of the larger employers have been participating in subsidizing employee housing. A robust voucher program could help a lot of folks once a financing mechanism is realized. Lastly, the article mentions supply. Could demand ever be satisfied without becoming Santa Monica ourselves?
Research for the proposed rent control ordinance will require much precious staff time and take away from ongoing efforts such as the Short Term Rental ordinance. This proposal is political, not practical, and would be to the detriment of the tenants that it purports to serve.
Randy Rowse is the mayor of the City of Santa Barbara.
