The cost of rent is an incredible burden on many Californians. When the median rental price for a two-bedroom apartment is around $2,300, it’s obvious that things have gotten out of control.
The question of “why?” is the issue that spurs debate – and a heated debate it is.
I had a lengthy conversation with a San Francisco-based real estate developer last year, and it opened my eyes. I was on the tail-end of my MBA at the time, so I had economics on the brain and was blown away by just how obvious the root cause seemed to me.
As with everything in our politics, optics and soundbyte-driven culture today, logic often isn’t what we turn to for answers, and rarely does anyone actually look to the root cause to solve an issue.
Politicians, left-leaning media outlets and activists will tell you that it’s those greedy real estate developers and investors driving up the costs of housing, doing their best to cast the blame on those
shameful “one percenters” driven by profits.
It’s no surprise that the same politicians are themselves seated in the higher echelons of income. Have you ever looked up how much Nancy Pelosi, Maxine Waters and Dianne Feinstein are worth?
What the multi-millionaire politicians and journalists won’t tell you is that it’s their “progressive” policies that have directly caused the problem. It all breaks down to a simple equation of supply and demand, and there is a recent “progressive” proposal that threatens to further exacerbate the housing crisis in our state.
There is an advocacy group, “Housing is a Human Right,” that is currently pushing for a California state-wide ballot initiative to implement rent control in this state. It looks good on its face to people who don’t understand what caused the crisis, and many people who are paying most of their paychecks to rent are happy to jump on the bandwagon.
I was surprised when the developer told me that it can take up to five years just to get approval to build in San Francisco, due to the stifling regulations and bureaucratic approval processes for building in this state. I’ve heard many of the same complaints from Los Angeles-based developers, and it’s the root cause of the high costs in this state.
Due to the high costs of developing in California, many don’t. Because of the long lead-time to get approval and then build in this state, it takes far too long to increase the housing supply. As the population increases faster than the housing supply we have a scarcity issue, which forces the prices up, as it will in any business.
So what would a statewide rent control law do to the supply and demand issues we already have in California? The issue with “progressive” economic policies is that they look at everything in a vacuum, and assume that everything will stay the same once their policy is implemented.
Anyone with experience outside of academia can tell you that is rarely the case.
If rent control is implemented and the regulations are not reduced to building, why would developers keep building? If it already takes five years and is extremely expensive to develop a new project, in a state that gets more hostile to business every year, how many do you think will stay here rather than fleeing to another, more business-friendly, state (as many businesses already have)?
This bandaid will not solve the housing crisis in California, and will likely make it much worse. Until we tackle the root cause (stifling regulations to building), anything else is merely a poison pill packed in a candy wrapper.
Robert Patrick Lewis is a Green Beret OIF/OEF combat veteran with 10th SFG(A), CMO of Heroes Media Group, entrepreneur, MBA and award-winning author of Love Me When I’m Gone: The True Story of Life, Love and Loss for A Green Beret In Post-9/11 War , The Pact and The Pact Book II: Battle Hymn of the Republic. Follow him @RobertPLewis on Twitter or on his RobertPatrickLewisAuthor Facebook page.