Economist Walter Williams once said: “Short of aerial bombardment, the best way to destroy a city is through rent controls.” And boy, was he right. So were the 93 percent of economists twice surveyed who called it bad policy. Who am I to argue with that?
Call it “rent control” or “rent stabilization,” it is the same thing with the same harmful effects. Sold as a temporary “fix” around the World Wars, it has been a permanent fixture in California since the late 1970s. Since then, it has spread to dozens of local jurisdictions on top of the state’s own rent caps. And what can California boast today? Some of the worst housing shortages in the country, the largest homeless population, and affordability that keeps slipping away.
Part of the problem is that politicians cannot restrain themselves. Rent caps are only the beginning. To administer them, local governments build multi-million-dollar rental registries, hire staff, and then charge property owners for the pleasure of living under price controls. Then come the eviction protections that strip owners of any say over who lives on their property, even when it is being damaged, overtaken by nuisance tenants, or used for criminal activity. There are then seismic retrofit mandates, inspection programs, habitability and discrimination exposure, restrictions on selling properties, and ever-increasing relocation fees.
Those of us who are small “mom and pop” owners look at all this and wonder why we bother. A new regulation here, a little “tweak” there, and slowly the housing regulations become death by a thousand cuts until the camel’s back breaks. The decision ultimately gets made: “I’m out!” There goes another small operator taking the exit ramp, along with an affordable place to live that becomes a redevelopment project for some “big guy” who builds shiny new luxury units. Our housing shortage grows.
We have seen this movie before. In 2022, the City of St. Paul foolishly voted in rent control. Economists warned the law would shut down construction, and it did. Projects moved next door to Minneapolis, where permits went up while St. Paul’s fell some 60 percent or more. Some might say it is great that St. Paul worked so hard on affordability. But if nothing is being built, there is no place to live.
Further east, rent control continues to destroy New York City. With price controls on annual increases and on new tenancies, and no relief for capital improvements, it is impossible to make ends meet. But wait, there is more. Socialist Mayor Mamdani has imposed a two-year rent freeze and sends out goon squads of city inspectors citing owners for any perceived, mostly unjustified, violation under the sun. Owners there are selling at discounts of 40 percent or more or losing properties to foreclosure, and lenders have pulled back while servicing their own bad loans.
Things are so bad that it no longer pencils out to rehabilitate a vacant unit in New York after a tenant leaves. Turnover can run tens of thousands of dollars, sometimes more than $100,000, and when the next tenant’s rent is only a couple of percentage points or less higher, there is no return, so the work does not get done. Some estimates put the number of vacant, mothballed units in New York City at 57,000. My sources say it exceeds 100,000.
Tenants suffer too. Many winners of a below-market unit refuse to ever leave, passing up better career prospects elsewhere or commuting long distances rather than give up cheap housing. Future tenants cannot find anything when turnover dries up. And rent-controlled buildings often lack newer appliances, quieter windows, and updated paint that owners outside rent control can afford.
As Santa Barbara’s eventual rent control policy takes hold and the add-ons follow, owners near the margin between operating in the black or in the red will stop taking care of their properties. Upgrades like new windows or an EV charging station will never happen. Eventually the exit ramp gets contemplated, properties held by families for decades are sold, and affordable housing is gone. New construction leaves too. It is too easy, like in a game of Monopoly, to pass go and do not collect rent control. Why build in Santa Barbara when you can go next door to Goleta or into the unincorporated county?
Only with time will Santa Barbara realize its law will not make housing more affordable for everyone, just for the lucky few who happen to be living in a rent-controlled unit the day it takes effect. As one economist put it, “rent control is a cruel bargain; stability and subsidies for some renters in exchange for the exclusion and exploitation of others.” Rent control does not target those in need, it is a wealth transfer from landlord to renters rich or poor. And it is the future tenants and property owners who are left holding the short end of the stick.
Daniel Yukelson is a housing provider in Santa Barbara County and chief executive of the Apartment Association of Greater Los Angeles. He states he is fortunate to own a property outside city limits in unincorporated Santa Barbara County.
