Student Blog: The West Coast Housing Crisis
by Kevin Brothers, RBFL Student Editor
On the west coast, California and Oregon are dealing with serious affordable housing crises that have left many struggling to keep a roof over their heads, or left without one altogether. In Oregon, approximately 14,476 individuals are reported to be homeless.[1]The number of those experiencing chronic homelessness has jumped 28.6% between 2017 and 2018, the second worst rate in the country.[2]Fifty percent of renters in the state are cost burdened, meaning that they must pay more than thirty percent of their income on rent.[3]This issue is highlighted by the fact that Oregonians, according to a study conducted by the National Low-Income Housing Coalition, had to earn $22.97 an hour at a full-time job in order to comfortably pay the average rent of a two-bedroom unit.[4]In California, the situation is far more dire. Approximately 129,972 individuals experience homelessness accounting for nearly a quarter of the total homeless population in the country.[5]Median home prices in the Golden State have crested over the $600,000 mark.[6]Ranking second worst in the country, Californians must earn an average wage of $34.69 an hour in order to comfortably pay rent on the average two-bedroom unit.[7]
California and Oregon legislators have both recently enacted legislation that imposes upon landlords a mandatory cap on annual rent increases as well as measures to protect tenants from no-fault evictions.[8]Rent control, rent stabilization, rent inflation caps, inflation protection: brand it as you wish but this housing mechanism carries with it a checkered past and the nearly universal disdain of economists.[9]My upcoming note explores the ramifications of these new rent control statutes and asks the question: Can the new rent control measures overcome previous issues created by similar regulations implemented in the past and provide effective relief for these states’ respective affordable housing crises? I chose to explore this topic because as a native Californian, I have seen firsthand the devastating effects of the housing crisis and hope that our legislators are taking the proper approach to address this dire situation.
Proponents of the rent control measures tout its positive effects on financial stability and certainty for renters’ budgets. However, economists argue that rent control makes renting to tenants less financially viable, thereby encouraging them to withdraw their property from the rental market to be repurposed into condos and other uses. Economists also attack rent control measures on the theory that it discourages investment in real estate development and production of affordable housing stock. A study of rent control implemented in San Francisco in 1994 pointed out that available rental stock decreased by fifteen percent as landlords were disincentivized from keeping their units on the market.[10]These points address the need for more production of affordable housing stock as the core issue of the housing crisis. California Governor Gavin Newsom said it himself: “We need to build more damn houses.”[11]Will this address that core issue? Sadly, I think not.
[1]Dept. of Housing and Urban Development, 2018 Annual Homeless Assessment Report to Congress (2018).
[2]Id.
[3]Juan Carlos Ordonez, The epicenter of Oregon’s housing crisis, Oregon Center for Public Policy (Mar. 20, 2018), https://www.ocpp.org/2018/03/20/epicenter-oregons-housing-crisis/.
[4]Out of Reach 2019, National Low Income Housing Coalition (2019)
[5]Dept. Housing and Urban Development, supra note 1.
[6]CA real estate: Median home price at $607,990 in July; 4th straight month above $600K, North Nev. Business Rev., https://www.nnbusinessview.com/news/ca-real-estate-median-home-price-at-607990-in-july-4th-straight-month-above-600k/ (last visited Oct. 14, 2019).
[7]Out of Reach 2019, supra note 3
[8]Cal Civ. Code§ 1946.2 (West 2019); Or. Rev. Stat. Ann.§ 90.427 (West 2019).
[9]Megan McArdle, The one issue every economist can agree is bad: Rent control, Wash. Post(June 24, 2019), https://www.washingtonpost.com/opinions/2019/06/15/comeback-rent-control-just-time-make-housing-shortages-worse/.
[10]Rebecca Diamond & Tim McQuade & Franklin Qian, The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality: Evidence from San Francisco, 109 Amer. Econ. Rev. 3365 (2019).
[11]Chuck Devore, Poverty And Affordable Housing – California’s New Rent Control Law Will Make Things Worse,Forbes (Sept. 13, 2019), https://www.forbes.com/sites/chuckdevore/2019/09/13/poverty-and-affordable-housing-californias-new-rent-control-law-will-make-things-worse/#5f10fb744281