UC Berkeley economist criticizes rent control, Prop 10 in new study

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In a study released this week, a UC Berkeley economist warns that repealing the Costa-Hawkins Rental Housing Act would worsen the state’s housing shortage.

The paper, authored by Kenneth T. Rosen and available here, focuses on the potential impacts of Proposition 10, a Nov. 6 ballot measure that would overturn 1995’s Costa-Hawkins Act.

Without Costa-Hawkins, California cities and counties could once again adopt extreme forms of rent control, including the imposition of rent caps on new apartments and single-family homes. Such moves would create a major disincentive for the development of much needed housing.

“The last thing California needs is another barrier to building new rental housing,” Rosen, chairman of UC Berkeley’s Fisher Center for Real Estate & Urban Economics, said in this news release.

His report, “The Case for Preserving Costa-Hawkins: Three Ways Rent Control Reduces the Supply of Rental Housing,” was jointly released this week by Rosen Consulting Group and the Fisher Center for Real Estate and Urban Economics at Berkeley’s Haas School of Business.

The paper is the first in a series of reports examining the impact of rent control on the economy and housing market.

The paper highlights three primary ways that rent control decreases the overall supply of apartments, which hurts renters:

  • Rent control incentivizes property owners to convert rental units to other uses, such as for-sale housing units or non-residential buildings
  • Rent control reduces the effective supply of available rental units through an inefficient allocation of housing
  • Rent control limits the creation of new rental supply by discouraging development activity.

All of these factors combine to decrease the supply of rental housing in markets with rent control, which ultimately lowers apartment availability and raises rents.

“California cities need more rental housing at every price level, but rent control is a major road block to solving the statewide housing shortage,” Rosen said.

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