In response to Santa Barbara’s rent control ordinance, here are my top six reasons why rent control is bad for renters:
1. Increased rents: Landlords are incentivized to raise rent by the maximum amount by law every chance they get because if they do not, they will lose the chance later. This results in more frequent rent increases for renters.
2. Poorer living conditions: Landlords do not have the incentive to maintain and improve rent controlled property as much as market rate rentals because they do not have the ability to increase the rent as needed. This results in less maintenance, cutbacks in upgrades, and poorer service to tenants.
3. Tenants will sublease: If a tenant’s rent controlled apartment is below market rates, tenants may sublease their unit to pocket the difference as profit to themselves. This scheme was used repeatedly in rent control in Santa Monica. Therefore, in many instances, rent control does not provide lower rents but incentivizes tenants to sublease illegally to pocket the difference in the market rate.
4. The best landlords are “Mom and Pop” owners — not corporations, governments, or affordable housing agencies. Why? “Mom and Pops” may have lived in the property years ago, have pride in the property, usually like the tenants, and often do not increase rents. I often hear from landlords saying they have not raised the rent on their renter since they moved in 10 or more years ago because they want to help them, they are such nice tenants, and like family to them.
With rent control, landlords are encouraged to raise rents to the maximum allowed by law or risk the chance of raising it later if needed.
5. Banks do not like to lend on properties with rent control because of the increased risk of default: Expenses and inflation may rise more than an increase in rent making their loan payments more at risk. This hurts renters with fewer properties available, higher interest rates because of riskier loans, and less money available for the landlord to invest in the property for the renter.
6. Property values and condition deteriorate: Rental property values are based on their income. Lower income = lower value. Lower values = poorer condition. Fact: Renters do not care for properties as much as owners. Thus renters will be forced to live in poorer conditions.
The incentive should be for home ownership, not perpetual renting. One’s wealth is not created by renting. Owning your own home with no debt is the most affordable housing you will ever have. Let’s use that as your goal when making affordable housing decisions.
Rent control is not the answer to cheaper living costs. Home ownership, more supply, low property taxes, ease of regulations and more free market competition in housing are the answers.
Allan S. Jones
President and principal broker
Santa Ynez Valley Real Estate Company