As expected, California Gov. Gavin Newsom (D) has signed legislation passed by the state legislature last week that imposes statewide rent control on landlords in the state.
The measure passed the state legislature last week by a large 48-26 margin. Interestingly, the legislature was apparently unmoved by the fact that California voters handily defeated — by an overwhelming margin — a rent control measure in November 2018.
The new law passed by the legislature puts a cap on the amount of rent increases that a landlord can impose at 10 percent or 5 percent plus the annual cost of inflation, whichever is lower.
California has been facing an increasing poverty and housing crisis — housing in California is, quite simply, too expensive for its residents and too scarce even for those who can afford it. The combined effects of these crises have created a homelessness crisis in California that is one of the worst in the country's post-depression history.
The problem is especially acute in the larger cities with higher real estate values. The state government of California has responded by taking measures designed to force suburban communities to accept responsibility for housing part of the state's homeless population, which has resulted in massive protests and even a concerted effort to recall Los Angeles mayor Eric Garcetti.
Legislators who voted for the bill were no doubt responding to residents' complaints about rising rent costs; however, as even the predominantly liberal California population recognized last November, rent control has been widely discredited by economists as a viable public policy measure.
As many economists predicted when the city of New York imposed rent control, rent control generally actually leads to a shortage of housing, since governmental caps reduce the profit incentive to create additional housing, and also leads to "shabbification" since landlords cannot often recoup the costs of upgrading (or even properly maintaining) their properties under a rent control regime.