SF’s Aaron Peskin Says His Rent Control Plan Will Build More Housing. We Checked His Sources
To bolster his new bill, the city’s progressive stalwart leans on two studies. The authors say their work is being grossly misrepresented.
For decades, San Francisco has suffered from sky-high rents and a shortage of available housing. But now California is mandating that its cities and towns build more homes, and the state’s top cop says he’ll enforce it. SF will need to build more than 82,000 homes by 2031 — that’s nearly triple the amount of new housing completed over recent years.
As city leaders scramble to craft their own plans to boost SF’s housing stock, Sup. Aaron Peskin has proposed a game-changer: A bill that says certain new multiunit projects must include rent control too. This would be largest expansion of SF rent control since 1979.
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When Peskin’s plan emerged three weeks ago, critics said it would be bad medicine, in effect blunting new construction and making it harder for the city to reach its goals. Peskin countered by citing two studies, which his legislation uses to build a case that more rent control and more construction can go hand in hand.
The problem is the researchers who wrote those studies say their work is being misused, misunderstood, and misquoted. Kenneth Rosen, whose 2020 paper focused on the Bay Area, told The Frisc that the supervisor apparently “didn’t read the report.”
Rosen, chairman of the Berkeley Haas Fisher Center for Real Estate and Urban Economics, was notably upset when asked about how his report was characterized in the Peskin bill: “He just took what he wanted to say.”
The second study cited in Peskin’s legislation looked at Boston after the state of Massachusetts ended rent control in 1995. When The Frisc reached out to author David Sims, an economics professor at Utah’s Brigham Young University, Sims explained that his study wasn’t relevant to Peskin’s proposal.
The District 3 supervisor and his staff did not respond to multiple requests for comment. Yet if the academic underpinnings of Peskin’s legislation are disputed by the academic researchers themselves, it raises the question: What impact would the plan actually have?
More density, more control
Peskin’s plan, in essence, is a grand bargain. Current rules allow developers to build taller and denser buildings beyond local zoning limits — for example, six stories instead of four. In exchange, more of those units need to be priced or rented below market rate. It’s an approach to create more housing, especially affordable housing.
According to Peskin’s plan, any development that taps the HOME-SF program, which offers “density or height” incentives, would have to include rent-controlled units as well. How many rent-controlled units is not clear.
Peskin wants to cement it into the city charter through a ballot measure, which means he needs six votes from the Board of Supervisors and a majority approval from voters this November. (He already has the support of fellow supervisors Connie Chan and Shamann Walton.)
The SF Building and Construction Trades Council, the Housing Rights Committee of SF, and Tenants Together have expressed support for the proposal. “I don’t think it’s putting new development in shackles the way that some people want to portray it,” said Shanti Singh, legislative director for Tenants Together, a renter advocacy group. She pointed out that landlords and developers in rent-controlled units can already raise their prices by a certain percentage. “They actually don’t need to be giving people insane rent increases.”
Peskin said his aim is to protect tenants and stanch displacement. He has asserted that his rent control bill would in fact give developers the incentive to build, in part because landlords can still set initial rents at whatever amount they like.
But housing and growth advocates say his plan would have the opposite effect. Tall or dense projects in the HOME-SF program already face financial hurdles, said Todd David, executive director of the advocacy group Housing Action Coalition. Adding rent-control requirements would make those projects even riskier to finance, and with all sorts of other risks to deal with — like high building costs and shaky markets — David doubted that much would actually get built.
“It just makes the HOME-SF program less economically feasible,” added David. In other words, Peskin’s policy would result in few new rent controlled units, or none at all.
What the studies actually show
In 1979, SF passed mandatory rent control on all apartments built up to that point, but no further. Rent control on new units was abolished in SF in 1995, when California passed the Costa-Hawkins Act. Today, roughly 70 percent of SF renters still live in rent-stabilized units, thanks to a housing stock that’s some of the oldest west of the Mississippi.
One of the studies misconstrued by Peskin, the 2020 work by Rosen and others, looked at the rate of production of new units in San Francisco before and after Costa-Hawkins.
The study finds that SF built more after Costa-Hawkins, when developers didn’t fear the imposition of new rent-control laws. After controlling for various factors, the study found that Costa-Hawkins contributed a bump of nearly 20 percent more multiunit buildings than would have been built otherwise. (Rosen noted that his research was sponsored in part by the Home Builders Association.)
Peskin’s legislation characterizes Rosen’s 2020 study this way (and also gets the date wrong): “A more recent 2018 [sic] study by the Rosen Consulting Group, ‘The Effect of Rent Control on New Housing Supply: A Bay Area Case Study,’ found there was no statistically significant difference in the rate of housing production between jurisdictions with rent control statutes or ordinances and those without.” (This isn’t the first time that housing studies have been distorted in the ideological battles over building.)
‘If you have rent control attached to new construction, you will not get new buildings built.’ —Berkeley economist Kenneth Rosen
When contacted by The Frisc, Rosen was blunt: His study absolutely does not say what is implied in Peskin’s bill. What’s more, Rosen believed that Peskin’s proposal would devastate new housing construction. “If you have rent control attached to new construction, you will not get new buildings built,” Rosen said.
As for the Boston study, Peskin’s plan says it found that rent control had “little effect on the construction of new housing.”
Sims, who was a bit more diplomatic than Rosen, called it misleading. His study examined when Massachusetts ended rent control: Boston didn’t see a change, positive or negative, in the production of new housing. What’s more, rent control led some Boston landlords to turn their rent-controlled properties into condominiums. That led to lower availability of rental housing, making apartments more expensive.
Peskin is putting forward something entirely different, according to Sims: He would be starting new rent-control laws.
Still damn high
The SF supervisor is correct that stable rents protect tenants from displacement. Tenants fortunate to have rent control are up to 20 percent more likely to stay in their homes, especially older and long-term residents.
San Francisco has created ways of keeping costs down for some folks. One way is through an exception to Costa-Hawkins that allows the city to build new rent-controlled units on a case-by-case basis as part of a negotiation with a given developer. For example, Dan Sider, chief of staff to the SF Planning Department, named two recent projects with rent-controlled units, Trinity Plaza and Parkmerced. (Trinity Plaza is open. The oft-delayed Parkmerced is years away from completion.)
The decision to include rent control in those projects was part of complicated negotiations between the city and the developers. “We are giving the developer something — extra density, extra height, for example — and in return we are getting something like extra affordability or extra money for transit,” said Sider. In those cases, Sider explained, the new developments were replacing old rent-controlled units on the same parcel, so it made sense to ask for rent control in talks.
If Peskin’s law passes, though, the city will have to prioritize rent control whenever it offers developers a height or density bonus. But there’s always a cost. In exchange for rent control, the developer might give fewer dollars for local transit or add fewer below-market rate units. Or the developer might not build at all.
There are other ways to protect tenants without all the trade-offs of rent control. In 2019, California lawmakers passed AB 1482, which prevented landlords from charging more than a 10 percent annual rent increase. That law has lots of exceptions, however. Singh advocated for the law, often known as an “anti-price-gouging” policy or a rent cap, but said that it still isn’t enough. “A 10 percent year-over-year annual rent increase is a tremendous amount for a working-class person,” she noted.
Capping rent is a risk. Cap it too tight, and the rent cap just turns into rent control. (Right now landlords can raise the rent no more than 2.3 percent in rent-controlled units.) At a certain point, developers aren’t able to line up financing or make any return, and the city’s new housing construction stalls. These rent-control measures also set up a Hobson’s choice: Would you rather look out for today’s tenants or the people who need a place to live tomorrow?
In Peskin’s legislation, that question might apply to every higher-density project in San Francisco. “This articulates city policy as elevating rent control above other concerns,” said Sider of the Planning Department. “That’s a trade-off that the voters would make.”
Adam Echelman covers housing and development for The Frisc.
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