Silicon Valley is experiencing a very interesting period in their housing market. The rapid growth of prosperity in the region coupled with a large influx of residents are putting a strain on the market. Major tech conglomerates are amid a six-year employment boom, adding too many jobs to the area without nearly enough housing for the new employees. This is creating a feud with the cities in the area who are experiencing sky rocketing rents due to the increased demand in the market.
In order to combat the rising apartment costs legislation has been proposed to enact rent controls that would keep rent increases, for existing tenants, near the rate of inflation. The proposed legislation has stirred up a lot of controversy in the area. On one hand there are Tenant organizations, unions, and church groups going door to door to raise support for the new legislation. On the other hand, there are landlords and real-estate agents backed by large groups, such as the National Association of Realtors, pouring money into TV ads and flyers; in opposition of the new legislation.
Class Relation As renting becomes increasingly popular in the United States, issues like the shortage of houses in Silicon Valley will be a more frequent issue throughout all housing markets. Signs of this trend can already be seen in the housing market, as the average asking rent percent increase out paces the average listing price increase. As of June 2016 the average asking rent was up 9% compared to the average list price only being up 7%. Personal Opinion The debate over the legislation is interesting because both sides have agreed that rent control will not fix the situation.
The landlords and realtors are arguing that the rent controls will not bring down rents nor increase new supply in the area which is the only real way to address the demand issue that the region is facing. Economists also agree that the new legislation is inefficient in solving the problem.
Christopher Palmer, an economist at University of California Berkeley’s Haas School of Business, who has studied rent control argues, “It’s not necessarily helping those that need it most,” and “Property improvements and overall property values also tend to be held back by such regulations. 1 On the other side of the debate there are people like service workers and teachers that have had to relocate to areas far away from their places of work in order to find somewhere affordable to live. I find this debate very interesting as the situation they are in is very difficult. The area is experiencing a vast increase in demand in their housing market. My original thought is that this would result in increasing home prices and be beneficial to the home owners of the area.
I never thought to consider the rental side of the industry and the impact that this increased demand would have on monthly rent payments. The rising rental prices are a serious dilemma that the area is going to have to deal with and in this case I side with the landlords and realtors. The only real way to fix the situation they are in is to increase the supply in the housing market in order to decrease the average rent prices. This can be done by increasing construction of affordable apartment complexes; creating jobs for those displaced by the raising rents and offering less expensive housing options.