In 1979, when rent control was first passed in San Francisco, two important issues were not addressed:
- A needs-assessment of renters and
- The disproportionate social obligation imposed on those providing the housing
How many of us know renters whose annual income far exceeds that of the property owner from whom they are renting? This is especially true when the owners are seniors living on a fixed income and dependent on their rental income. Furthermore, with the number of renters in rent-controlled apartments (60%), far exceeding the number of individuals owning small rental properties, a minority population greatly outnumbered at the voting booth is often conveniently scapegoated for the lack of affordable housing.
Add to this mix an unintended consequence: the price new renters pay when they move into a recently vacated unit whose market-rate rent must compensate for the below-market rents paid by those occupying rent-controlled units – some for decades.
While we can’t go back to 1979 and correct rent control’s inherent flaws, we can strive to make things fairer and more equitable – for both new renters and property owners going forward.
Two Vital Commodities: Food and Shelter
Marsha N. Cohen, a professor at UC Hastings College of the Law and founding executive director of Lawyers for America, observes that “Shelter, like food, is something we all must have. Yet, as a society, we have approached meeting these two needs very differently.”
For example, supermarkets are not required to adjust the cost of their groceries based on the income of their customers. Instead, food for the needy comes from federal programs such as Supplemental Nutritional Assistance (SNAP – formerly known as Food Stamps) and the National School Lunch program, as well as from private charities. We don’t require food sellers, large or small, to offer one price to some people and a lower price to others.
While the needy receive shelter via federal housing programs such as Section 8, San Francisco and other cities also rely heavily on locally-mandated rent control. But rent control differs dramatically from other forms of assistance.
“Rent control requires landlords to provide housing to some at a lower price, sometimes far lower prices than to others, irrespective of the size or profitability of the landlord’s business,” states Professor Cohen, “and, unlike all other government assistance programs that are needs-based, there is no requirement that the rent-controlled housing go to those most in need. Or even in need at all.”
Rent Stamps – a More Equitable Approach
Professor Cohen feels Sacramento should take a totally new approach to meeting the critical human need for shelter, one that neither imposes the costs of this societal need on a subset of the population (rental property owners) nor confers its benefits randomly without regard to financial need. She proposes the idea of Rent Stamps. “That is, a state rent subsidy program that is broader than the federal Section 8 housing subsidy.”
How to Pay for It
Since the cost of living varies drastically throughout California’s 58 counties, deciding who gets subsidies (and in what amounts) and how the state pays for them would need to be determined.
Taxing rental real estate profits is one option proposed by Professor Cohen, but that would still be placing an unfair burden on a minority of Californians. She further suggests tapping the state’s general fund, which depends on personal income and sales tax revenues but spreads the cost more widely.
Another idea: perhaps property owners renting to those in the new Rent Stamp program could receive a special credit on their property taxes or on their state income tax returns. Or add a “Rent Assistance Contribution Fund” checkbox option to the “contributions” section of State form 540.
But whatever the source of funding for such a state-wide program, most fair-minded people would agree that placing the burden of providing housing subsidies without regard to financial need, on just one group is patently unfair. As Professor Cohen concludes, “One thing is for certain. Ren control has proven it is not the solution to providing shelter for all.”
Brian Wallace is a SPOSFI member. Reprinted with permission of the Small Property Owners of San Francisco Institute (SPOSFI) News. For more information on becoming a member of SPOSFI or to send a tax-deductible donation, please visit their website at www.smallprop.org or call (415) 647-2419.