That is why the fixed rental price does not work

In response to the Santa Barbara Rental Rate Control Ordinance, here are my top six reasons why rental rate control is bad for renters:

1. Increased rents: Landlords are offered an incentive to increase the rent by the statutory maximum amount whenever the opportunity arises, because if they do not do this, they lose the chance later. This leads to more frequent rent increases for tenants.

2. Worse living conditions: Landlords have no incentive to maintain and improve properties that are dependent on rental prices, as they do not have the opportunity to increase the rent as needed. This leads to less maintenance, cuts in upgrades and poorer service for tenants.

3. Tenants will sublet: If a tenant’s rental price-linked apartment is below market prices, tenants can sublet their apartment in order to make the difference as profit for themselves. This scheme has been used repeatedly in rental price control in Santa Monica. Therefore, in many cases, the rent brake does not offer lower rents, but instead offers tenants an incentive to sublet illegally in order to make up the difference in the market price.

4. The best landlords are mom and pop owners – not companies, governments, or affordable housing agencies. Why? “Mom and Pops” may have lived in the property years ago, are proud of the property, mostly like the tenants, and often do not raise the rents. I often hear from landlords that they have not increased their tenant’s rent since they moved in 10 or more years ago because they want to help them, they are such nice tenants and like family to them.

With the rent cap, landlords are encouraged to increase rents to the legally permissible maximum or to risk the chance of increasing them later if necessary.

5. Because of the increased risk of default, banks are reluctant to grant loans for real estate with rental price controls: Expenses and inflation can rise faster than an increase in rent, which puts their loan payments at greater risk. This hurts tenants with less available real estate, higher interest rates due to riskier loans, and less money the landlord has to invest in the property for the tenant.

6. Property values ​​and condition deteriorate: The value of the rental property depends on the income. Lower income = lower value. Lower values ​​= worse condition. Fact: Tenants are not as interested in real estate as owners are. This forces the tenants to live in worse conditions.

The incentive should apply to home ownership, not perpetual rent. Your own wealth does not come from renting. Owning a home with no debt is the cheapest apartment you will ever have. Let’s use this as your goal when making decisions about affordable housing.

Rent controls are not the answer to lower living costs. Homeownership, more supply, low property taxes, easy regulation and more free market competition in housing are the answers.

Allan S. Jones

President and Chief Broker

Santa Ynez Valley real estate company


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