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The Lockean Project

Making sense of rents

“Making sense of rents,” Carmel Pine Cone – June 9, 2023, Editorial

LAST WEEK we used this space to argue that the way to make housing affordable is to make it plentiful — and that the way to do that is to stop requiring affordable housing to be built and start allowing it to be built.

In other words, if government wants to lower the cost of housing in California, the way to achieve it isn’t rent control, inclusionary housing, or any other kind of mandate. The thing to do is for government to get out of the way by relaxing zoning rules and easing permit regulations, thereby freeing the private sector to take over and do what it does best: provide plenty of something at the lowest possible cost.

The verity of this kind of free-market logic is obvious from history, but it remains anathema to many whose sense of right and wrong is stuck in the early 19th century, when almost every country was ruled by an autocrat, there was no middle class, and all the land was owned by the nobility or the church. In those days, except for the upper crust, everybody was a renter, people rarely moved, and what you paid for your modest home or your patch of farmable land was whatever the owner decided to charge.

Is that still true? Are tenants today beholden to their landlords, powerless to pay whatever is demanded of them?

In many parts of California, it can certainly seem that way, but not because our landlords are greedier than people who own apartment buildings in other parts of the country. What makes California’s housing expensive, especially in desirable coastal areas, is that there isn’t enough of it.

This isn’t true everywhere. As the Wall Street Journal reported this week, “Historic numbers of new rental apartments opening in the South and South-west over the next 18 months are poised to decrease profits for the largest publicly traded landlords, who are already contending with slower or declining rent growth.” Nationally, WSJ reporter Will Parker said, “more than 950,000 multifamily units are under construction, three times the number from two decades ago.” How many are under construction in the Monterey Peninsula? We haven’t studied the question, but except for a handful of expensive condos, an educated guess seems to be … none.

Meanwhile, rents are falling in areas with plenty of new housing, such as Phoenix and Las Vegas, the Journal reported. In these communities, people looking for rental apartments have lots of choices, and landlords are competing to sign them up not only by lowering rents, but by offering incentives such as free months, reduced security deposits, and even gift cards and big-screen TVs, according to a website that offers advice to young renters.

“People need housing and housing needs people,” aptly said.

For going on 50 years, Sacramento has made California a famously difficult place to build anything. When people like Gov. Gavin Newsom and his allies in the state legislature discovered the housing shortage they created, they tried to reverse course by requiring communities to start approving new housing regardless of the consequences for their history, culture, infrastructure, or quality of life. But these new policies are as misguided as the ones they replaced.

Instead, the key, as we have said, is to get out of the way. Let the communities that want to grow do so by opening the doors to as much private housing development as their current and future residents require. As they do, affordable rents will happen all by themselves.