The City of Healdsburg is trying to bypass the Costa-Hawkins legislation by considering an ordinance related to “just cause for eviction.”
In 1995, the California State Legislature enacted the Costa-Hawkins Rental Housing Act, preventing local governments from enacting rent controls on single-family homes and on housing built after 1995. Rent controls limit how much landlords can charge their tenants.
Healdsburg isn’t calling their ordinance a rent-control ordinance, but if it walks like a duck and quacks like a duck, it’s probably a duck. Healdsburg is considering charging a $7,000 relocation fee for evicting a tenant without just cause or for increasing the rent by more than 10 percent in a given year. Any local statute that prevents negotiation between landlord and tenant enters into the rent control arena.
As a property manager, I am biased. I don’t deny it. However, I stand by my position and anyone who knows anything about economics will likely agree with me. To start, it limits or eliminates the construction of new housing (or commercial property if rent control is applied to it, too). The only ones who benefit from rent control are those who’ve secured their housing. The ones who lose are not just the landlords, but also the community.
Because rent control removes the impetus for developers to build new houses, our housing shortage gets worse and worse, making it harder for doctors, teachers, police officers, and others to come to our community. I imagine the no-growth advocates are happy about this, but our community needs qualified professionals to fill vacancies in important jobs. If they can’t find adequate housing, they won’t come and we won’t have the services we need.
To try to pretend the $7,000 relocation penalty applied to the landlord for increasing rents to market values is anything but rent control is ludicrous. I am hard-pressed to believe that solely because someone occupies an apartment or house that they have an inalienable right to continue living there to the detriment of others, including those looking for a place to live and landlords looking for a return on their investment.
The best possible solution to the housing shortage, especially the shortage of rental properties, is not rent control, which will inevitably lead to further shortages. The answer is to increase supply and the way to increase supply is to reduce the cost of development.
Local and state government need to get out of the way of future development. The laws of supply and demand apply to rental housing, just like everything else. A huge part of the cost of housing is based on government intervention, whether in the form of zoning restrictions, unreasonable building requirements, or the sometimes deliberate/sometimes inadvertent delays in the ultimate construction of housing. Add that to the risk of any given project being rejected for any reason, whether it be government intervention or market conditions, and it’s not hard to understand why we have a shortage.
The bottom line is this: as the cost of housing rises, rents must rise to support new development. If rents cannot increase to fair market levels, we will continue to see a shortage of housing and the vicious circle continues. In the final analysis, if you want to see an increase in housing at more affordable prices, encourage government representatives at all levels to stop trying to fix problems better handled by the free market.
If you have questions about getting into real estate, please contact me at email@example.com or call (707) 462-4000. If you have an idea for a future column, share it with me and if I use it, I’ll send you a $25 gift certificate to Schat’s Bakery. Dick Selzer is a real estate broker who has been in the business for more than 40 years.