Rent-control policies likely 'fueled' SF gentrification, Stanford economists say

Rockwell, a luxury condo complex, located at 1688 Pine Street, is seen on Thursday, Feb. 2, 2017 in San Francisco, Calif. Rockwell, a luxury condo complex, located at 1688 Pine Street, is seen on Thursday, Feb. 2, 2017 in San Francisco, Calif. Photo: Santiago Mejia, The Chronicle Buy photo Photo: Santiago Mejia, The Chronicle Image 1 of / 34 Caption Close Rent-control policies likely 'fueled' SF gentrification, Stanford economists say 1 / 34 Back to Gallery

Rent control policies in San Francisco may have fueled gentrification, Stanford economists say.

Stanford economists Rebecca Diamond and Tim McQuade, who published their findings last month, said occupants of rent-controlled apartments built before 1980 are 20 percent more likely to stay than other renters.

It might seem that rent-control policies, therefore, act as a bastion against gentrification, by allowing and encouraging long-term residents to stay, but the researchers say that's not exactly the case.

"Rent control exacerbates the housing shortage by pushing landlords to remove supply of rental housing," Diamond told SFGATE.

She explained that the expansion of rent control "would likely benefit current tenants, especially older ones who likely do not need to move very often," but in the long term, "the rental market will make all rents even more expensive by causing landlords to remove supply."

In 1994, San Francisco residents voted to expand rent-control policies and grant certain protections to renters in pre-1980 apartments. Some landlords subject to the initiative responded by converting their holdings into condos and single-family homes, or redeveloping the buildings to exempt them from rent control, said researchers, who added that this reduced the city's rental housing supply by 15 percent and led to a 7-percent citywide rent increase.

The authors posit that "substitution toward owner occupied and high-end new construction rental housing likely fueled the gentrification of San Francisco, as these types of properties cater to higher income individuals."

Anya Svanoe with Alliance of Californians for Community Empowerment (ACCE) says San Francisco's rent-control policies have been flawed from the start. Rent control itself is not the problem, she said, but a "loophole" in the San Francisco legislation that allows landlords to increase rent an unlimited amount whenever a master tenant moves.

"Rent control is an immediate solution that will provide relief to families experiencing displacement today," she said. In the longterm, construction of affordable housing is essential for those most threatened by displacement.

"For-profit developers build to make a profit, and that's not the kind of housing we need," she said.

The Stanford study found landlords with property in desirable neighborhoods were more likely to try to remove their tenants, either through move-in evictions, buy outs or the Ellis Act, a law that allows landlords to evict tenants if they intend to remove their property from the rental market (by converting it to condos, for example).

Renters impacted by a decreased housing supply could be protected against with governmental insurance, such as subsidies or tax credit, against large rent increases, the study authors say, which would shift responsibility from landlords.

The Stanford study comes at a moment when Bay Area residents must contend with rising rents –the average rental price of a two-bedroom apartment in the city is $4,248, according to Rentcafe – and rampant gentrification.

Under current state law, housing built after the passage of the 1995 Costa-Hawkins Act cannot be subject to rent control. A proposed new ballot measure, filed by ACCE, would repeal Costa-Hawkins and allow cities to create new rent-controlled residences for the first time in more than 20 years. To qualify for the 2018 ballot, the measure will require 365,880 signatures.

Seven Bay Area cities, including Berkeley and Oakland, have rent control regulations. According to a 2014 policy proposal from local advocacy organization Spur, San Francisco has 172,000 rent-controlled units, which comprises about 75 percent of the city's rental stock. In its proposal, Spur urged for the protection of existing rent-controlled housing coupled with doubling the amount of subsidized units and reinvestment in the public housing stock.

Michelle Robertson is an SFGATE staff writer. Email her at mrobertson@sfchronicle.com or find her on Twitter at @mrobertsonsf.