The Sacramento region felt major impacts stemming from the housing crisis. From 2016-2017, there was roughly a 10% increase in rent costs and it is estimated that this year will end in another 10% increase from 2017. Due to the pressure of the housing crisis at hand, Sacramento has been considering implementing various rent regulations as a tactic to combat the rising rental prices. Mayor Steinberg is considering several options, such as requiring landlords to give increased notice when they are raising the rent above a certain percentage and raising the local sales tax to fund more affordable housing and infrastructure.
However, these rent regulations do not fully model the rent control ordinances that cities like San Francisco and Los Angeles have. Rent control, when not barred by Costa-Hawkins, restricts landlords from raising prices on current and incoming tenants. Typically, these ordinances include a cap of raising rent 1-5% per year and have built in tenant rights, such as preventing eviction except under certain circumstances like failure to pay rent. The current initiative buzzing around Sacramento would be a rent cap of 5% and tenant "just cause" protections, which limit the landlord's abilities to evict tenants.
Despite the theory behind rent control regulations, when implemented the policies actually stifle the market and scare the owners of single-family rentals away. Mayor Steinberg, homeowners, and developers believe that the real solution to the housing crisis Sacramento is facing is to build more infrastructure and housing to support the growing population. This is nothing more than a simple supply and demand solution: a larger supple will have the effect of reducing competitive demand. It will open up the market to more opportunities for home ownership and bring competitive balance to the rental market. California is currently the worst state in terms of housing; currently, 3.4 million units need to be built in the state to keep up with the current population demand.
Economists across all political spectrums agree that rent control regulations may help in the short term but the damage caused by these regulations in the long run far outweigh any menial decrease in rent that would occur. For example, the two most expensive rental areas in the state, the Bay Area and Los Angeles region, also happen to house every city that has enacted rent control policies and economists agree that this is not a coincidence.
The real solution to the problem is more housing needs to be built, which Mayor Steinberg has addressed by committing to building 1,000 small homes for the homeless population in Sacramento. This is a tiny step in the right direction. But the reality is that rent control will not solve a problem created by a shortage of available housing units.
By: D. Keith B. Dunnagan, Esq.