Urban Equity blogs

Rent Control Died in California and Ontario. Now What?

19 November 2018 by André Darmanin0
Image Courtesy of The Globe and Mail

I woke up to a blog post from Toronto Housing Matters where they supported the Province of Ontario’s decision to partially eliminate rent control on newer rental buildings.

The post continued into an academically, yet basic, economics argument on supply and demand, then moves to a discussion of why rent control is intrinsically horrible, especially for low-income renters.  I wasn’t convinced, so I did some digging. 

Several weeks ago, Californians overwhelmingly defeated on Prop 10, which was meant to overturn anti-rent control legislation – the Costa-Hawkins Rental Act. Ballotpedia described it as follows:

Costa-Hawkins was a state statute that limits the use of rent control in California. Costa-Hawkins provided that cities cannot enact rent control on (a) housing first occupied after February 1, 1995, and (b) housing units where the title is separate from connected units, such as condominiums and townhouses. Costa-Hawkins also provided that landlords have a right to increase rent prices to market rates when a tenant moves out. Prior to the enactment of Costa-Hawkins, local governments were permitted to enact rent control, provided that landlords would receive just and reasonable returns on their rental properties. The California State Legislature passed Costa-Hawkins in 1995.

From Ballotpedia.org

Opponents of Prop 10 outraised supporters 3:1, so, naturally, the ballot initiative was D.O.A. Opponents included the real estate industry, rental apartment association, the NAACP and the current Governor-Elect Gavin Newsom.  The same groups who you’d expect to undermine rent control legislation here in Ontario. 

I actually expected commentators such as Matt Yglesias and Paul Krugman as well as reputable think tanks like The Brookings Institution to be on board with rent control.  The evidence suggests that rent control is only a short-term measure, but in the end, the focus should be on building more or creating supply which will alleviate scarcity. 

While the timing of the defeat of Prop 10 seems coincidental with the Conservatives backtracking on rent control, I am sure it wasn’t even as the PC Party, and more so Doug Ford seemingly has the support of the development community.

If the centre-left, centrists and the right all agree that rent control is a bad idea, then what can those further to the left hang their hats on? Manuel Pastor, a University of Southern California professor who I heard on a recent Rail-Volution podcast discussed the need for economics classes need to update the way rent control/regulation is discussed (skip to the 23:30 mark). 

The key findings in Pastor’s paper “Rent Matters: What are the Impacts of Rent Stabilization Matters?” included:

  • Rent regulations do not necessarily increase the rent of non-regulated units and may actually keep rent more affordable for all.
  • Rent regulations have minimal negative impact on new construction.
  • Rent stabilization increases housing stability, which has important health and educational attainment benefits.
  • When rent regulations allow for condominium conversion, units are then taken off the market.
  • There is no conclusive evidence about the impacts on “mom and pop” landlords.
  • Rent regulations may deter gentrification.

If rent regulations are combined with other policies that would promote supply, as what Matt Yglesias said Prop 10 didn’t do, and what the previous Liberal government chose to do as part of Ontario’s Fair Housing Plan such as inclusionary zoning, then it might be a better sell job.  As well, the report also mentioned that job training and economic development programs that are tied to rent control could lift incomes and promote mobility.

In California, state legislators are looking to reintroduce rent control with another ballot measure in 2020. Measure R, the Transportation ballot initiative passed in 2008 which was at the same time as Barack Obama’s election and the Americans sentiment for change was ripe. 

The Provincial Fair Housing Plan here in Ontario might not have the same fate. Critics mention there were plenty of loopholes. The Conservatives will definitely change or kill the Plan, and undeniably worst for renters. How will the Conservatives ensure housing supply is increased is still an unknown.  Will they return to the idea of reopening the Greenbelt to build housing? Will municipalities like Toronto change its outdated zoning in the Yellowbelt to build midrise housing?

I have no confidence in the economic purists of the Toronto Housing Matters ilk to justify why there are no workable solutions to build more housing and promote affordability.  There have to be better solutions.  In California, they’re trying again.  In Ontario, I’m not so sure. 

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