Editor:
I am a long term Santa Monica resident, and can remember the bad old days of “vacancy control”. It was horrific.
Prop 21 would return vacancy control to Santa Monica, and so cap the price of rents to new renters, often at very low levels - and over time inflation will send those capped rents lower and lower.
(All of what follows is not about the existing rent control, but about the extreme form of rent control called “vacancy control.”)
It is well known that capping the price of goods below market price always leads to inefficient use of those goods and the collapse of supply. Just look at the gas crisis of the 1970’s; where price caps turned a minor price adjustment into a disastrous loss of supply.
Apartments are no different: Price caps encourage inefficient use of gas (wasteful driving) and apartments (cheap rent means not having to rent out a spare bedroom, or using an apartment part time or as a weekend retreat.) And price caps discourage new supply (digging new oil wells or building new apartments or pulling super cheap rentals off the market). Price caps also create black markets and the reselling on of the goods at well above market price (illegal subletting/fraud.)
Inefficient use of housing supply would be where a $1000 per month 2-bedroom apartment is occupied by a single person. But in a $2000 a month 2-bedroom you might find two roommates. This creates a home for an additional person and helps ease any housing shortage.
If I were a landlord forced to rent out an apartment for $900 that should go for $2000 I would leave it vacant. The rent control fees, gas and water costs, maintenance and hassle mean it would make more sense to leave it empty. Plus if it is rented out at $900, then that renter will never, ever move out.. Better to leave it empty and wait till a change in the law, or even demolish the whole thing. Thus price caps will have directly caused loss of supply.
It is also common that when a low rent apartment comes available it will go the well connected. (As, doubtless the wealthy and powerful were unaffected by the gas crisis). So much for the working class benefiting.
Once a tenant has rented an apartment, there is an argument that they should be protected from eviction or excessive rent increases, as moving apartments is a costly and difficult process. That is the current situation in Santa Monica and there is merit in this normal form of rent control - but the abnormal vacancy control is utterly self-destructive.
Political rationale for strict vacancy control includes:
It costs nothing to legislate into place and, unlike the gas crisis, the damage is inflicted slowly and insidiously over time. Thus the renters who can’t find a home at any price don’t understand why it’s happening and can only cry out for more rent control, which would be like pouring gasoline on a house fire.
It sounds like you are helping the poor. (But usually the wealthy and well connected get the low rent places.)
Cheap rents for everyone! (How about gas as well? Which is just as essential to modern life.) But of course only a lucky few get the low rents and cheap gas.. The rest face dry pumps and no vacancies at any price.
Renters already in low rent apartments feel trapped and are fearful of the loss of rent control. They think that vacancy control will give them a chance to move with cheap rents. (But they never will snag such a rare unicorn. And their buildings will be in ruins and facing demolition as the owners fight bankruptcy.).
It is claimed that vacancy control will discourage owners from harassing low rent tenants into leaving. But in reality such cases are uncommon and are always resolved in the tenants favor very quickly. Santa Monica has very strict laws and heavy penalties, even imprisonment, against harassment. If harassment were common we would see an army of owners being locked up - but that is clearly not so. But the city still trumpets there that there is a wave of criminal harassment sweeping the city. That fanning of fear keeps renters voting for those who now trumpet vacancy control.
And when vacancy control has killed all supply, the next step is a government-managed waiting list. And then you end up with 20-year waits for an apartment, as currently happens in Stockholm, Sweden. Pitfalls of rent restraints: why Stockholm’s model has failed many (Of course the well connected at city hall will jump the list and get the choicest apartments.)
Pitfalls of rent restraints: why Stockholm’s model has failed many
Half a million are on the waiting list for rent-controlled flats in Stockholm, meaning a two-tier system, bribes...
Trying to legislate away the loss of supply caused by price caps only makes things worse. The government has tried (many times in many different ways) to cap the price of gasoline and always ended up with dry pumps and fist fights in the resulting lines. The Swedes aren’t fools (apart from when it comes to rent control) and the best result they have come up with is 20-year waiting lists, and a huge black market of illegal subletting that leaves sub-tenants renting at gigantic markups with no protections. They tried it in Santa Monica before and ended up with crippled supply and decrepit ruins for buildings.
Santa Monica in the 1980’s really was in a distressing state. We are lucky (no, very unlucky) to have a real example of what really happened when vacancy control existed in Santa Monica, and what will happen should it come back: Santa Monica really was called “Skidrow-by-the-sea.” The apartment buildings really were decrepit slums. There really was a ‘demolition-derby’ as apartments were torn down and replaced with condos. There really weren’t any apartments to rent. People visiting from other cities really were appalled by the horrific, crumbling, Eastern-Bloc appearance of the place. (What a coincidence: Stalin believed in price caps too.). It really will all happen again, should Prop 21 pass.
Peter Borresen, Santa Monica
