Why Rent Control Fails Communities: The Hidden Costs of Prop. 33

By Michele Allyn
2024 President
Santa Barbara Association of Realtors

The rallying cry of people who support Proposition 33 and other rent control measures is that they will keep housing affordable for tenants, but the long-term impacts on communities are always harmful. By limiting the ability of housing providers to raise rents by a reasonable amount, rent control disrupts the natural forces of the housing market and brings about consequences that negatively affect both housing providers and tenants.

One of the biggest issues with rent control is that it restricts rental income from keeping up with inflation and other market trends. It artificially sets a ceiling that does not align with housing that is subject to the natural forces of supply and demand. When housing providers can’t adjust rents in line with market rates, they struggle to cover rising costs like property taxes, insurance, materials, and maintenance labor. This squeeze on cash flow makes it harder for providers to meet mortgage payments, potentially leading to defaults and even foreclosures. As financial pressure builds, housing providers might cut back on maintenance, leading to buildings falling into disrepair and diminishing the overall quality of housing in the community.

Rent control also disrupts the local housing market by reducing incentives for housing providers to invest in or upgrade their properties. With limited potential returns, property owners may opt against reinvesting in their buildings or making necessary repairs. This can lead to a decline in the quality of housing, affecting the overall appeal and vitality of the neighborhood.

While rent control claims to offer short-term benefits for tenants, it tends to shrink the supply of rental housing over time. Housing providers under financial strain might be less willing to rent out units or could convert them to other uses, further reducing the availability of rentals. Additionally, rent control can create a “tenancy lock-in” effect, where tenants stay in units that no longer suit their needs simply to keep their lower rent. This lack of mobility slows turnover in the rental market, making it tougher for newcomers to find housing.

The impact of rent control can extend to the broader community through its effects on property values. Lower property values not only limit housing providers’ ability to refinance and reinvest but also reduce property tax revenues for local governments. This can result in fewer resources for public services like schools and infrastructure, ultimately affecting the overall quality of life in the area.

Measures like Proposition 33 and other rent control ordinances aim to make housing more affordable but lead to unintended consequences that make communities less vibrant and financially stable. There’s a reason that the No on 33 campaign has support from both sides of the aisle, from Governor Newsom and the California NAACP to the Chambers of Commerce and California Association of REALTORS. Instead of offering a long-term solution to housing affordability, rent control policies like Proposition 33 tend to create financial stress that hurts housing providers, tenants, and the entire community.

Michele Allyn is the owner and manager of Allyn & Associates Real Estate and Lending, a real estate brokerage and mortgage company, serving Santa Barbara, California’s Central Coast, Ventura, Riverside, San Diego and Greater Los Angeles County. Michele has been a member of the Santa Barbara Association of Realtors since 1973, and currently serves as the President of the Board of Directors. Reach Michele at 805-895-5101 or micheleallyn@yahoo.com.