The Stanford economists eschewed the standard theory of rent control, which does not account for socioeconomic complexity. Crunching their huge datasets with pages and pages of mind-numbing mathematics – such as vt (x, θ t−1) − vt (x θ , θ t−1) = ln pt (x| θ t−1) − ln pt (x θ | θ t−1) – the economists teased out the economic impacts of rent control on tenants and landlords in San Francisco, historically. They found that San Francisco’s rent controls have produced both winners and losers. • Winners: Individual rent-controlled households have saved up to $6,000 a year, for a total benefit to tenants of $2.9 billion from 1994 to 2012. • Losers: Renters who leased units after 1994 paid 5% ($2.9 billion) more than they would have paid absent rent control. • Winners & losers: Due to rent control restrictions, landlords reduced the supply of available housing by 15% by converting to condos or owner move-ins: “This led to a city-wide rent increase of 7% [landlords win] and caused $5 billion of welfare losses to all renters.” But, the authors note, the rush of new supply to meet increasing demand is reducing the historic loss to the tenant category. The authors explain that San Francisco landlords typically pass on the costs of capital improvements to tenants. And that “contradicts the traditional view of rent control, that landlords will be disincentivized from investing in the property. On the contrary, we find that landlords appear to make significant investments in their properties.”
raising the incomes of poor households (that is, reducing poverty), decreasing the costs of occupying decent dwellings, or helping poor households pay those costs.” WINNERS AND LOSERS IN CALIFORNIA Fifteen California municipalities already have rent controls, and more want to institute controls to stabilize the turbulent rental markets. In November, statewide voters will decide whether to keep the Costa-Hawkins Housing Act of 1995, a law that forbids local governments from placing rent controls on single-family housing and condominiums. Costa-Hawkins permits landlords to raise rents on vacated units to market prices. Abolishing the law will allow local governments to limit those increases. But abolishing Costa-Hawkins would not automatically lead to unbridled rent control, as other state laws guarantee fair rates of return for landlords. And elected officials are generally not opposed to development – quite the opposite. Hungry for supportive data, both sides in the campaign are cherry-picking a Stanford University study of rent control in San Francisco published in September 2017. The study, by economists Rebecca Diamond, Tim McQuade, and Franklin Qian, dipped into pools of big data provided by the consumer identity management firm Infutor. Micro- detailed consumer profiles were merged with digitized municipal records to create a first-of- its-kind dataset.
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