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Why Is The California Teachers Association Backing This Low-Rent Idea?

CTA thinks rent control will ease California’s affordable housing crisis, but it will likely make it worse.

A group of supposedly “progressive” organizations in California, including the California Teachers Association and the union-funded Alliance of Californians for Community Empowerment, are backing a voter initiative this November that would repeal the Costa-Hawkins Rental Housing Act, a 23-year old state law that sets strict limits on local rent control laws.

It’s the centerpiece of an effort to address the state’s affordable housing crisis, which has left low and middle-income Californians priced out of big cities like San Francisco, where the median monthly rent for a one-bedroom apartment reached $3,490 last month. In fact, five of the ten most expensive rental markets in the country are now in California (San Francisco, San Jose, Los Angeles, Oakland, and San Diego) and nearly 1.7 million families across the state currently spend more than half of their monthly income on rent.

Median one-bedroom rental prices in San Francisco as of June 2018 (graphic from zumper.com).

Repealing the Costa-Hawkins Rental Housing Act would likely result in a flood of new rent control ordinances across the state. According to Marketplace, a dozen cities in California already have plans in place for new rent control measures if the initiative is approved by voters this fall.

Proponents of the initiative claim that expanding rent control will rein in “out-of-control housing costs, driven by corporate landlords and big real estate” and “protect all families from rent gouging.” For its part, CTA argues that reinstating rent control will alleviate a housing crisis that has exacerbated a (supposed) statewide teacher shortage.

“We’re facing a severe teacher shortage in California, and one of the main issues is affordable housing — for teachers being able to live in the communities where they teach,” CTA president Eric Heins said in a recent interview with Politico. “When I lived in San Francisco, the only way I was able to afford to live there was with a rent-controlled apartment.”

While California certainly needs to take decisive steps to address its shortage of affordable housing, it is well-established that expanding rent control is the last thing the state should do. There is broad consensus among economists – from across the political spectrum – that rent control measures, no matter how well-intended, end up doing more harm than good.

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“Rent control is among the best-understood issues in all of economics, and – among economists, anyway – one of the least controversial,” Paul Krugman explained in an essay in the New York Times. “Almost every freshman-level textbook contains a case study on rent control, using its known adverse side effects to illustrate the principles of supply and demand.”

Every college student who takes Econ 101 will encounter a graph like this. S = supply, D = demand, E = equilibrium price (graphic from OpenStaxCollege).

Price controls end up shrinking the overall supply of rental housing. Facing a decline in revenues, some landlords will opt to turn their apartments into condominiums, sell them, and invest their money elsewhere. At the same time, real estate developers have less of an financial incentive to build new rental housing that would offset those losses.

The decline in supply is compounded by the fact that tenants living in rent-controlled apartments are more likely to stay put because the bargain they’re getting on rent is just too good to give up. A recent study from a trio of Stanford economists found that San Francisco’s current (limited) rent control regime “increased the probability a renter stayed at their address by close to 20 percent.” This effectively locks up a chunk of existing rental stock, further shrinking the pool of available apartments.

Supporters of the rent control initiative marched in Sacramento in April.

So while proponents may insist that rent control will help working families, don’t believe the hype. Ironically, rent control is more likely to benefit the young tech bro who makes six-figures and already has an apartment in the Mission District than the single mother of three who has to commute to work from Fremont every day because she can’t afford a place in the city.

All of this begs the question of why the California Teachers Association is spending its money and leveraging its political clout to back an initiative that will actually make the state’s affordable housing worse. As with many things CTA does, fact and reason doesn’t seem to be part of their equation.

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Written by Peter Cook

Pete became involved in education reform as a 2002 Teach For America corps member in New Orleans Public Schools and has worked in various capacities at Teach For America, KIPP, TNTP, and the Recovery School District. As a consultant, he developed teacher evaluation systems and served as a strategic advisor to school district leaders in Cleveland, Nashville, Chattanooga, and Jefferson Parish, Louisiana. He now writes about education policy and politics and lives in New Orleans.

A Dubious Distinction, But Well-Deserved