Everyone knows the Econ 101 rent control stuff. But after Econ 101, there's more advanced econ classes where you explore issues more in depth. That was my goal by asking what specifics in this ordinance will lead to the sky is falling rent control issues.
So first, if a landlord raises a low-income tenant's rent 16% in two years, there's no way that person can afford that increase because they are on a fixed income. Therefore the tenant will be forced to move out. Now our benevolent landlord can raise rents to whatever they want. So value add positions will still occur, it just may take a different approach. Where some see lemons, others make lemonade.
Secondly, there's no new affordable housing being built in this city now! So a rent control measure won't be the reason that's not happening in the future.
Third, @Ike Ekeh if a property owner increases rents by 6% every year, doesn't the value of that commercial property increase each year due to the increased income? Also, statistically California counties rely on property tax revenue from SFRs drastically more than they do from commercial/industrial property. So, I don't see a real issue with property tax stagnation. The real source of property tax stagnation is California's split roll property tax rule. This loophole limits commercial/industrial property reassessment upon sale. Large property owners have been using their special interests to stall all legislation that would have fixed this issue years ago.
Fourth, @Paul Choi, in response to this statement --"But value-add assets where the owners failed to raise rents in the past because of laziness, low debt and expenses, etc will be screwed." I would argue those owners are screwed because of their laziness and business ineptitude.
Fifth, I agree that supply issues are generally the cause of out of control rents. But, this rent control ordinance doesn't constrain new properties because they are exempt from rent control. So long as it pencils out, savvy investors will simply knockdown a lot with a small home on it and build multis. Or they'll take a 16 unit and make it a 32 unit. They're already doing that in the SFR space (knock down or pop the top and add square footage). And that's the real issue with supply right now: it costs too much and takes too long to build property for the middle of the road consumer. And that's due to government fees and zoning rules. So @Robert C., I agree with your point there. The state has been trying to force locals to streamline things with bills like SB 95, SB 35, SB 167, AB 678, and AB 1515. Personally, SB 95 will likely help me build without worrying about parking issues.
Finally, everyone is overlooking one thing: the City of Sacramento could not put its head in the sand and pretend that the rent control issue would go away. They had to act because an ordinance would have been put on the ballot by rent control advocates. When your choice is, (a) a rent control ordinance completely written by rent control advocates that will be impossible to amend and (b) a rent control ordinance negotiated with both sides, you have to choose (b). It is always easy to criticize, but the real work is in trying solve the problem. So there's no point in arguing "this was a dumb idea" "rent control is always a bad idea" unless the next statement is, "here's how we can make it better." That's where the classes after Econ 101 are necessary.
