The Town of Fairfax is embroiled in a heated debate about rent control in the wake of the Council passing Fairfax Rent Control Ordinances #870 and #871 without a public vote. Many have criticized the Town Council for their “disregard for their constituent's expressed desires, wants, and needs” and are calling these ordinances “costly, contentious, deeply flawed legislation that fails to represent the wishes of the majority of the town's residents.”
This rising opposition to the directions the Council has been pursuing comes on the heels of another hot topic; the City Council’s proposal to rename Sir Francis Drake Boulevard, because Sir Francis had been a slave owner. Though these two issues are unrelated, what binds them in the minds of many constituents is the attitude certain council members have, Stephanie Hellman being the most prominent among them, about denying the public to have a say in the Council’s decisions.
For example, residents cite comments Ms. Hellman made in a recent interview on ABC News, Channel 7, when she was asked by reporter Wayne Freedman about putting the Sir Francis Drake renaming issue to a public vote, wherein she stated,
“There are some things, in the name of ‘progress,’ that just have to be done. I 'hear' the white-dominated population that’s not okay with this change, but you can’t put it up to a vote because that’s only listening to the 90 percent, right?”
After getting past a “Did she just accuse 90 percent of Fairfax voters of being racist, slave-owner-lovers?” moment, consider that this is coming from someone who is probably horrified by the over-reaching, ultra-right politicians in Ohio, Tennessee, Florida, Texas, Alabama, and Louisiana who are passing laws to disenfranchise the voting rights of black and brown majorities in those states.
I understand the values and emotions involved and Sir Francis Drake, although a man of his time, is not someone we would hold in high esteem today. And changing street names for reasons like this is a tradition as old as civilization, itself. So, if that's what the people of Fairfax want, change the name. And if that takes public education by the sponsors to win that vote, so be it. But, there's absolutely no excuse to ever deny the vote of the majority. That's why democracy works.
That said, let’s examine the issue at hand; rent control, another issue that should come up for public vote.
I want to preface talking about rent control by saying there is no denying that there are greedy landlords who raise rents too aggressively and don't care
at all about their tenants or their living conditions. There are and in
their cases, they've brought all the consequences of rent control on themselves. But they are in the minority, particularly in small towns like Fairfax.
Rent control first became a widespread political issue because of the post-World War I housing shortages in 1917 and due to the economic impacts of the 1918 Spanish Flu pandemic. A similar surge in interest in passing rent-restrictive legislation and passing temporary “rent freezes” occurred during the Depression era 1930s and early 1940s around the time of World War II, when there was an urgent need for housing of all kinds.
Although the circumstances are quite different today (unemployment reached 25% of the adult population in the 1930s and there were no unemployment checks, social security payments, or other government relief until after 1935), one can still appreciate the comparison to the overall “unaffordability economy” we are living with today.
The law of unintended consequences
Like it or not, it is axiomatic that in a market-based economy returns on investment are the driver of new housing development and operating expenses are subject to unpredictable and un-mitigatable inflation, supply chain issues, and a long list of other circumstances.
This is not arguable. One either accounts for market forces in planning or everyone suffers the consequences.
Because of this, rent control can only be a quick fix for affordable housing in the short term because it increases the affordable housing development and management problems many times over in the long-term.
Over time, any well-intended effort to stop the displacement of disadvantaged residents using rent control has the immediate positive impact of freezing housing rental costs and limiting rent increases. However, over the longer term rent control dramatically decreases housing construction investment and the amounts landlords are willing to spend on maintenance and improvements of existing housing.
It is absolutely critical that politicians understand this. Rent control is a disincentive to investment in real estate development at a time when we need incentives. Rent control is a Band-Aid with huge counter-productive outcomes -- not a substitute for a sustainable, affordable housing plan.
According to the American Institute for Economic Research, in a June 2022 report titled, “The Perpetual Tragedy of New York’s Rent Control,”
“In a quote often repeated by Milton Friedman, Swedish economist Assar Lindbeck said, “In many cases, rent control appears to be the most efficient technique presently known to destroy a city — except for bombing.”
Again, the fundamental and fatal paradox embedded in the rent control concept is that it is employed to stop the inflation of housing rental costs, which helps on the renter side, but does nothing to pay for inflating operating costs on the property owner side, which can only lead to deterioration of existing properties due to lack of revenues to pay for maintenance and repairs – the end result being a decrease in new housing construction and an increase in substandard housing. And, unfortunately, it always comes up for discussion at time, such as now, when we need more private investment in new types of housing -- particularly with regard to zero-carbon, green construction technologies -- not less.
The history of the South Bronx in New York City is the poster child for the phenomenon Milton Friedman referred to. After decades of rent control, apartment building owners began to simply walk away from their properties, leaving the tenants to fend for themselves. By the late 1970s into the 1980s so many buildings were abandoned that many neighborhoods became uninhabitable… and then came the fires (some intentionally set to collect insurance money) that turned the South Bronx into a “no man’s land.”
Again, according to the American Institute for Economic Research,
“Because of rent control and its violations of the rights of landlords and tenants, New York suffered from a severe paucity of new rental construction. In many years in the 1970s and into the 1980s, more units were abandoned each year by landlords than were built. This coincided with a decline in New York City’s population of nearly 1 million people.”
Eventually, the banks and city resorted to trying to sell abandoned multifamily properties for $1 if the new owners would agree to renovate the dilapidated apartment buildings, but they didn’t get many takers. Ironically, in the decades that followed some of those areas were bull-dozed and cleared in order to allow construction of single-family homes – the only way to attract residents to return and revive the neighborhoods.
Of course, I'm not suggesting that this is what will happen in Fairfax. But the same dynamics always manifest themselves, one way or another, when rent restrictions are put in place.
This phenomenon was also seen in the late 1990s and early 2000s when thousands of units of affordable housing that had been created only a decade before by converting failed and abandoned market-rate projects into new Section 8 housing, under HUD’s “Moderate Rehabilitation” program and funded with low-cost loans, went bankrupt because the rental subsidies failed to keep up with significant increases in maintenance and operating costs (insurance, taxes, utilities, etc.).
The owners eventually handed over keys to lenders, who then sold the properties to developers for pennies on the dollar of defaulted debt (i.e., the “S&L Crisis”), who renovated them and turned them back into market-rate housing.
The history of rent control in the U.S. has repeatedly shown that the only time rent control has had a chance of working is when the housing was owned and operated by the government.
And even then it has failed spectacularly.
Pruitt Igoe is the most glaring example of this. It was a 33 building, 2,870-unit, public housing project built in 1954 in St. Louis, Missouri, designed by world-famous architect Minoru Yamasaki (who also designed the NYC World Trade Center Twin Towers) and was the largest public housing development in the country at the time. It was built with federal funds and its rents were subsidized by federal funds. Yet by as early as the mid-1960s, the project began to be plagued by poor maintenance and poor management leading to crime and vandalism.
The gap between the revenues from government rent subsidies and the operating costs for the government management agency widened dramatically from day one as if one arm of the government didn’t know (or care) what the other was doing. By 1970, the project was uninhabitable and two-thirds of the units had been abandoned. Starting in 1972, the entire project was blown up and torn down. The site remains a vacant pile of overgrown rubble to this day.
However, one doesn’t have to look much further than in our own backyard, at Golden Gate Village in Marin City, to see an example of the utter failure of government agencies to provide safe and livable public housing for those most in need. Those that live there deserve that and rental subsidy is needed for them to have that. But so, the system has failed to deliver.
Rent control is a seductive (but counterproductive) idea for those wanting good P.R. and a quick salve on a deep wound. But for durable, sustainable, affordable housing solutions and long term social equity we'll have to look elsewhere and try something new. (See 10 Things We Can Do Now To Promote Affordable Housing.)
 Rent control has worked marginally better in more socialized or authoritarian socioeconomic systems, i.e., Sweden, Singapore, China, etc.).
Bob Silvestri is a Marin County resident, the Editor of the Marin Post, and the founder and president of Community Venture Partners, a 501(c)(3) nonprofit community organization funded by individuals and nonprofit donors. Please consider DONATING TO THE MARIN POST AND CVP to enable us to continue to work on behalf of all California residents.