Rent "Stabilization": Santa Barbara's Fast Track to Slum City

By Elizabeth Crawford

Dear Mayor Rowse, Councilmembers Friedman, Jordan, Santamaria, Sneddon, Harmon and Gutierrez:

I write to you today to express my – as you might have guessed – extreme opposition to the Santa Barbara Rent Stabilization Ordinance. It will achieve nothing besides rent “stabilization,” and as written will have profound, transformative, and do lasting damage to all landlords, real estate investors in rental properties, rental property conditions, and the availability of rental unit stock itself.

In the very short term, this misguided, fact- and history-bare ordinance may momentarily provide stabilized rents for some Santa Barbara residents, but will predictably create degrading buildings, impoverished landlords, and accelerate the selling off of existing rental units.

These effects of rent control have been universal, well known, long-acknowledged and tremendously corrosive in every location that they have been tried.

As the Federal Reserve Bank of St Louis states (Feb 12, 2024), “Microeconomics textbooks depict these rental price ceiling policies as causing supply to fall and demand to increase, leading to a shortage in the market. Suppressing the return on rental property investment does little to incentivize investors to increase the supply, or quality, of housing. Such policies may lead to a permanent change in the housing supply mix, pushing housing supply into the owned market and out of the rental market, and will make renting less affordable in the long term.”

The Brookings Institute in 2018 wrote, “While rent control appears to help current tenants in the short run, in the long run it decreases affordability, fuels gentrification, and creates negative spillovers on the surrounding neighborhood. Caps on rents lead landlords to sell their rental properties to owner occupants so that landlords can still earn the market price for their real estate, as the return on their investments and assets consistently fail to meet real costs and market conditions.”

The National Multifamily Housing Council has, as one of its key precepts, an essay titled “The High Cost of Rent Control.” In it is stated “The profound economic and social consequences of government intervention in the nation’s housing markets have been documented in study after study, over the past twenty-five years. Nevertheless, a number of cities around the country continue to impose rent controls, usually with the stated goal of preserving affordable housing for low- and middle-income families. Rent control does not advance this important goal. To the contrary, rent control has actually reduced both the quality and quantity of available housing.

“When a community artificially restrains rents by adopting rent control, it tells builders not to make new investments and tells current providers to reduce their investments in existing housing, creating the perverse consequence of reducing, rather than expanding, the supply of housing.”

Now, to the specifics of Santa Barbara’s proposed “Rent Stabilization Ordinance.”

1) Section 26.90.040 states that landlords can raise rents no more than 60% of the Consumer Price Index, or 3% of existing rents, annually. WHY ARE LANDLORDS A PERSECUTED CLASS, THAT THEY ARE PENALIZED ON ALL COSTS OF INFLATION, MATERIALS, LABOR, TAXES, INSURANCE AND MORTGAGES?

Are there any other segments of our industries that are likewise handcuffed to lower-than-inflation prices that they can charge? Why not? It seems that landlords current and future are targeted unfairly simply by offering people a place to live.

2) Public Registry: All private information on landlords must now be entered into a public registry, for all to see and judge - Ownership history, Rents, Assets, Tax Base. And a landlord MUST publish this information in this public registry, or face charges of FRAUD - and be prevented from renting out their properties, prevented from pursuing eviction of deadbeat tenants, and prevented from advertising their properties. WHY MUST LANDLORDS EXPOSE ALL THEIR PRIVATE INFORMATION TO THE PUBLIC WHEN THEY CANNOT EVEN CHECK A POTENTIAL TENANT’S FINANCES OR RENTAL HISTORY, to help them assess a tenant’s ability to afford the rent? The question is - why would any landlord be foolish enough TO CONTINUE OFFERING THEIR PROPERTIES FOR RENT? Again - incredibly one-sided, and insanely unfair.

3) Section 26.90.070: Tenants may petition for lower rents, oppose their evictions simply by citing any dispute with the landlord or lack of repair or improvement not to their approval, or the rent calculation behind the rents they are charged. ONE COMPLAINT BY AN ADVERSARIAL TENANT CAN HALT EVICTION PROCEEDINGS AND FORCE THE PROPERTY OWNER INTO THE COURTS. Here we are again — incredibly one-sided, and insanely unfair.

4) Mortgage interest and property depreciation are excluded from calculated expenses — resulting in real losses to the land owner of upwards of 10-15% annually at current interest and depreciation rates. The ordinance provides a “right of petition” by the landowner, but the lawyering costs, time loss and aggravation are an undue burden placed upon this select group of individuals and is a prime disincentive for anyone to continue providing rental units to the public

5) Capital improvement cost pass-alongs are impeded by the ordinance’s cap of $100/month or 10% of the existing rent. This calculation removes the incentive for any land owner to make needed and desirable repairs and improvements to their properties.

WHAT SANTA BARBARA IS REFUSING TO ACKNOWLEDGE IS THAT IT ISN’T LANDLORDS WHO ARE THE PROBLEM - IT IS THE DRACONIAN BUILDING CODES AND POLICIES THAT HAVE CREATED THIS HOUSING SHORTAGE TO BEGIN WITH.

No wonder no new housing is being built in this mad, mad, mad regulatory environment.

THESE SOCIALIST BUILDING POLICIES ARE CREATING THE HOUSING SHORTAGE - AND SANTA BARBARA’S PROPOSED “SOLUTION” IS TO INSTEAD TURN ON THE SMALL CLASS OF INDIVIDUALS WHO OFFER WHAT LITTLE HOUSING REMAINS FOR THE PUBLIC.

I am astonished that you Councilmembers who support these corrosive ordinances, and your staff, either do not know all this, or purposefully ignore the deep, old, and widespread evidence of these terrible policies.

It’s like the old Leftist saying - “Socialism/Communism is awesome - it just hasn’t been implemented correctly.” I wonder if the Councilmembers think that you are simply smarter than all throughout history, and you won’t be subject to reality, economics, and history? I am just appalled to see dangerous ideas like this “Rent Stabilization Ordinance” coming to fruition here.

We were thinking of renting our own house out while we go to Virginia to help with our grand babies who are due in a few months — but as my husband and I both instantly agreed — WE WOULD RATHER SELL OUR DREAM HOME — AGAIN — RATHER THAN RENT IT OUT UNDER THESE CONFISCATORY POLICIES, ACCEPT SUCH RISK AND HEADACHES, AND POTENTIALLY LOSE IT ALTOGETHER.

None of this is news. None of this is a surprise. None of this is unpredicted.

DO WHAT IS THE ONLY REALISTIC AND LOGICAL THING THAT WILL SOLVE SANTA BARBARA’S HOUSING CRISIS — LOOSEN YOUR DRACONIAN BUILDING REGULATIONS AND ALLOW HOMES TO BE BUILT SENSIBLY AND AFFORDABLY.

Thank you.

Elizabeth Crawford is a housing provider living in Goleta, CA

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More on the upcoming Santa Barbara rent stabilization vote, and how you can get involved, here.

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