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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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Updated 2 hours ago - Politics & Policy

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