The Case for Preserving Costa-Hawkins: Three Ways Rent Control Reduces the Supply of Rental Housing

In order to highlight the significance of why this policy change would be detrimental for the California housing market, it is critical to understand the ways that rent control reduces the supply of rental housing units over time. Specifically, rent control ordinances reduce rental supply in several important ways: 1) Rent control incentivizes property owners to convert rental units to other uses, such as for-sale housing units or non-residential buildings; 2) Rent control reduces the effective supply of available rental units through an inefficient allocation of housing; and 3) Rent control limits the creation of new rental supply by discouraging development activity, especially without guaranteed exemptions for new properties and assurances that property owners can adjust rents to market level upon tenant vacancies. All of these factors combine to decrease the supply of rental housing in markets with rent control, which ultimately lowers apartment availability and raises rents.

Kenneth T. Rosen

UC Berkeley Fisher Center

September 1, 2018

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