Oct 9, 2019

Renter protections on the rise in response to sky-high housing costs

Reproduced from NMHC; Map: Axios Visuals

California Gov. Gavin Newsom yesterday signed legislation capping annual rent increases at 5% a year plus inflation for the next decade.

Why it matters: California is the third state this year to pass major renter protections in response to sky-high housing costs, a surge of homelessness in major cities and an outcry from residents who feel they are at the mercy of greedy landlords.

  • New York State lawmakers increased rent controls in New York City just before they expired, and allowed other towns to do the same.
  • Oregon made big news in March when it became the first state to impose a statewide permanent rent cap of 7% a year plus inflation.
  • In California, Newsom also signed legislation Tuesday that prohibits landlords from rejecting prospective tenants because they have Section 8 housing vouchers.

San Francisco and Los Angeles — where buying a house is increasingly out of reach and residents feel priced out of many rental properties as well — have become embodiments of a national housing crisis.

  • President Trump has repeatedly ripped into San Francisco for the rapid rise of homelessness, last week referring to it as a "tent city."
  • Nationwide, more than 21 million households (about half of American renters) spend more than 30% of income on housing — a threshold that HUD determines to be a high-cost burden.
  • Newsom said rent caps are an important first step in addressing the high cost of housing, but more needs to be done. “We need to build more damn housing,” he said.

The other side: Most economists and property investors loathe rent control, arguing that it stops new construction and discourages landlords from maintaining their properties, causing an already tight supply to deteriorate.

  • "The bill represents the implementation of a failed policy that does nothing to increase the supply of housing affordable to all income levels," said National Apartment Association CEO Robert Pinnegar.
  • "It is no coincidence that three of the nation’s most expensive places to live, including San Francisco, New York and D.C., continue to grapple with housing affordability despite their long-standing rent control ordinances," he continued.

Between the lines: Plenty of academic research over the past three decades shows long-term problems associated with rent control, and local leaders tend to avoid interfering with private property issues.

  • But ridiculous rents mean unhappy constituents. Valuable workers flee to cheaper cities. People end up living on the streets. Rent control is a relatively quick way for lawmakers to take action as tensions rise.

Go deeper: Curbed LA has more details about the new law, including its exemptions.

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Illustration: Rebecca Zisser

Four of the world's richest companies are pouring a collective $5 billion into housing on the West Coast, raising an expectation that companies will serve as part financier, part philanthropist as tech hubs try to add more supply to tight housing markets.

Driving the news: Apple this week pledged $2.5 billion to housing initiatives in Silicon Valley, where even high-paid tech workers — let alone teachers, nurses and police officers — are struggling to find houses they can afford.

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Apple will spend $2.5 billion to alleviate California housing crisis

Tim Cook attends the global premiere of the Apple TV series "The Morning Show" in New York last week. Photo: Roy Rochlin/WireImage

Apple CEO Tim Cook, unveiling a $2.5 billion plan to help alleviate California's housing availability and affordability crisis, told Axios in an interview that Apple feels "a profound responsibility" to the region where it was born and thrived.

  • "It’s just unsustainable," Cook said. "This problem is so big that the public sector cannot do it alone."
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