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The Case for Ending Rent Control 

Wednesday, Aug 9 2000
In the political pantheon of left-leaning San Francisco, Joan Holden is an icon of radical respectability. Since 1968, Holden has written 30 anti-capitalist plays for the Tony Award-winning San Francisco Mime Troupe. Last year's offering, City for Sale, satirized greedy developers and gentrification of the city's Mission District. As an artist-slash-housing activist, Holden has long been an advocate for rent control laws, which limit the amount of rent a landlord can charge tenants.

Holden says San Francisco's rent control ordinance should be broadened to cover all residential buildings, including live-work lofts, which currently are exempt from such controls. She has but a single demur to the enactment of stronger rent controls: She says landlords should be allowed to pass on the costs of capital improvements to tenants. A ballot initiative coming before local voters this fall would ban such capital improvement "pass-throughs"; Holden says the ban would be unfair to landlords, even "draconian."

Holden the rent control advocate is also, it turns out, Holden the landlord. She owns and operates a four-unit apartment building in the Mission District. She also recently applied to city government for permission to pass through $110,000 in capital improvements of her building to her rent-controlled tenants.

In some ways, Janan New is Holden's political mirror image. New is executive director of the San Francisco Apartment Association, a lobby for small- and medium-sized landlords. She opposes rent control, calling it a failed social policy. She blames the current "obscene" rents in San Francisco on governmental tampering. She says rent controls screw up the supply-and-demand mechanism that regulates prices in a capitalist economy. And, she opines, anti-landlord measures on the fall election ballot will blast rents into outer space and drive the middle class out of San Francisco.

New, however, will be staying in town. She owns a house, which, for a conservative who believes homeownership is a key part of the American Dream, is hardly unusual. But New was able to save money to buy her home by living in rent-controlled apartments for 17 years. "I am a firm believer in the free market," she explains, "but I needed a place to live."

In San Francisco, the debate over rent control is often more about emotion and ideology than study or impartial analysis. Most San Franciscans have a personal stake in rent control, one way or the other, and self-interest has its way of breeding ardor, spin, and outright hypocrisy.

The good and bad effects of rent control have, however, been studied nearly to death by a broad spectrum of public policy economists. The nearly universal verdict on rent control is that its mild forms can be beneficial to some renters, but that more stringent forms -- such as the form that exists in San Francisco -- create shortages of housing and high rents that harm tenants, especially the poor ones whom rent control was designed to protect.

In a political backlash against the economic downside of rent control, most jurisdictions that have experimented with it have in turn outlawed it. In San Francisco, however, a significant majority of voters live in rent-controlled dwellings and have -- in their minds -- transformed what was originally intended to serve as a temporary price control into a sacred right.

Politically powerful tenant activists claim that the economic law of supply and demand does not apply to the housing market, at least not in San Francisco, because, they say, with precious little proof, "infinite" numbers of people are ready to move here, if housing is built. An alliance of tenant organizations and neighborhood groups is working to pass laws that would further limit the development of commercial and residential space, on the unusual theory that a lack of supply will somehow reduce demand.

Scientific studies, government reports, and dozens of interviews with experts and players on both sides of the housing question, however, show that San Francisco's housing shortage and the high residential rents it has created are the result of two major factors: political impediments to housing construction and rent control itself.

In the thick of the debate about living space, the Board of Supervisors is commissioning San Francisco's first-ever study of rent control. It will take a year to complete, and, because rent control is the third rail of S.F. politics (much in the way that Social Security is the dangerously electrified issue on the national scene), there is no assurance that the study will lead to significant changes in San Francisco housing policy.

But there is clear need for change. Thousands of existing apartments have been withdrawn from the market, construction of new rental housing is severely restricted, and rents continue to reach for the stars.

Not in spite of rent control, but -- as history has proven -- because of it.

It was 1979. Elvis was dead. Disco was king. A weird mixture of inflation and recession -- called stagflation -- was so wracking the U.S. economy that Ronald Reagan was able to base his presidential campaign on a promise to address the crisis through an untested set of policy initiatives known collectively as supply-side economics.

In the spring of that year, San Francisco landlord Angelo Sangiacomo abruptly raised the rent on 5,000 middle-class tenants. Renters across the city revolted, organizing themselves to put a strict rent control ordinance on the fall ballot. Then-Mayor Dianne Feinstein and the San Francisco Board of Supervisors pre-empted the tenants' initiative by quickly enacting rent controls that were more moderate than the ones headed for the ballot.

Feinstein's rent control law was intended to be temporary, lasting only as long as the hyperinflation that was then afflicting the economy. This initial version of rent control was intended to serve a definite group: "senior citizens, persons on fixed incomes and low and moderate income households." People, that is, who were having a hard time paying rent.

The new law limited a landlord's ability to raise rents while guaranteeing landlords a "fair return" on their investments. It also exempted two- to four-unit buildings from rent controls, if the owner lived in one of the units. The law instituted just-cause evictions, which meant that tenants could no longer be evicted at the whim of the landlord, but only for nonpayment of rent or for nuisance behavior. Related ordinances greatly limited the conversion of apartments into condominiums, a practice that had been shrinking the rental supply.

About The Author

Peter Byrne


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