This was a very bad year for Oakland, California: poor town was just revealed to have the highest per capita homeless rate in the state. What’s going on here? My initial thought was that it must be Oakland’s homeless policy (in a word: indulgent). Then I noticed that San Diego doesn’t have near the homelessness problem as Oakland, despite having beautiful weather (making living outside still awful but a bit more tolerable than being on the streets in Chicago). So I decided to dig deeper.
This is what I found:
I did not start this exploration with the expectation of singling out rent control as a villain in the tragedy of homelessness. But that’s where I’ve ended up.
Imagine you own an apartment building with rents around $1300 a month and you can’t increase rent more than $130 a month per year without special dispensation from the powers that be. You have costs that go up every year, including insurance, property taxes, utilities, repair and maintenance. The lower the rent, the greater the expense-to-rent ratio. The economics don’t work out. So property owners and developers get out of the low-end market and the city ends up with fewer cheap apartments. And more people end up on the streets.
Yes, Oakland’s poverty rate is about 1.6 times higher than San Diego’s and San Diego has three times as many people (so you’d expect more units for rent). Then again, on August 6, 2019 San Diego had 486 rental units available for under $1600 compared to Oakland’s 22 units. That’s more than a twenty to one difference. Even accounting for its larger population and lower poverty rate, San Diego is doing a much better job than Oakland in housing its poorest residents.
Bay Area’s new homeless epicenter? by Sarah Ravani and Joaquin Palomino/San Francisco Chronicle| August 1, 2019
Grimes, P. W. and G. A. Chressanthis (1997). "Assessing the Effect of Rent Control on Homelessness." Journal of Urban Economics 41(1): 23-37. https://doi.org/10.1006/juec.1996.1085
Jenkins, Blair. 2009. “Rent Control: Do Economists Agree?” Econ Journal Watch 6(1): 73-112. https://econjwatch.org/articles/rent-control-do-economists-agree
https://econjwatch.org/File+download/238/2009-01-j ... ncl.pdf?mimetype=pdf
Nagy, John. 1997. Do Vacancy Decontrol Provisions Undo Rent Control? Journal of Urban Economics 42(1): 64-78. https://doi.org/10.1006/juec.1996.2014
Whitehead, C and Williams, CA “Assessing the evidence on Rent Control from an International Perspective” London School of Economics. October 2018 http://lselondonhousing.org/wp-content/uploads/2018/10/LSE-International-Evidence-on-Rent-Control-Report-2018-Final.pdf