Dear Friends-

Can rent control fix the housing crisis in Los Angeles?

No.  Not with the brilliants minds of the miserable bureaucratic microbes of Los Angeles City Hall.

That may not be the answer everybody wants to hear, particularly in a city where the rent on a modest apartment can sometimes make a person stare at the ceiling at three in the morning and wonder whether sleeping in the car might actually be cheaper.

But before we reach for another law, another regulation, another commission, and another twelve-million-dollar study explaining why housing is expensive, perhaps we should spend a few minutes with the old and unfashionable subject called Economics 101.

The problem begins with something remarkably simple.

There are too many people who want housing and not enough housing for them to live in.

That is the beginning of the story.

Los Angeles is a beautiful place. The ocean is here. The mountains are here. The weather is here. Jobs are here. Entertainment is here. Ports, universities, hospitals, restaurants, businesses, freeways and an enormous collection of people who have decided, for reasons both wise and mysterious, that they would like to live here.

And when a lot of people want something that is in short supply, they compete for it.

That is not a political opinion.

It is arithmetic.

Suppose ten families want an apartment and there are only three apartments available. The three landlords do not have to beg people to rent their units. They have the opposite problem. They have a line of people waiting outside the door.

The landlord looks at the line and thinks, quite rationally, "I wonder how much someone will pay?"

And the answer becomes the rent.

Now comes rent control.

The idea sounds wonderfully simple:

Housing is too expensive. So let's tell landlords they can't charge so much.

Yay!

Except that the apartments did not multiply.

You have simply put a lid on the price of something that remains scarce.

And this is where economics becomes rather inconvenient.

If you control the price without increasing the supply, you can create a different kind of problem. People who already have a rent-controlled apartment have an enormous incentive to stay. Why would they leave a good apartment with a controlled rent and go looking for another one that costs twice as much?

So people stay.

And the apartment disappears from the available market.

The person who needs an apartment today doesn't care that somebody else got a wonderful rent twenty years ago. He needs a place tonight.

That is the cruel irony of a housing shortage.

The people fortunate enough to have housing are protected.

The people standing outside the door have an increasingly difficult time getting in.

Los Angeles has spent decades making housing extraordinarily difficult and expensive to build. Zoning restrictions, lengthy approval processes, environmental reviews, parking requirements, neighborhood opposition, development fees, construction costs, financing costs and political battles can turn what should be a straightforward housing project into an epic journey involving more paperwork than the construction of the actual building.

And then we wonder why there aren't enough apartments.

Imagine if we solved the gasoline shortage by making it illegal to build new gas stations.

After a while, we could congratulate ourselves because the price of gasoline at the existing stations was controlled.

Of course, there would still be a line around the block.

The same basic principle applies to housing.

If you want housing to become more affordable over the long term, you have to build more housing.

That doesn't mean rent regulation has no legitimate purpose. There are people who can be hurt by sudden, enormous rent increases, particularly when they have lived in the same community for years. Reasonable protections against abuse can be justified.

But rent control should not be confused with a housing-production policy.

It isn't.

It doesn't create a single additional apartment.

And Los Angeles desperately needs apartments.

It needs apartments for teachers, nurses, police officers, restaurant workers, firefighters, young families, seniors, students and the young man or woman who has just arrived here with a college degree, two suitcases and the unreasonable expectation of having a roof over their head.

The shortage also creates another unfortunate consequence.

When housing becomes extraordinarily expensive, people begin doing extraordinary things to afford it.

Families double up.

Young adults remain with their parents long after they expected to leave.

People commute astonishing distances.

Apartments become overcrowded.

Businesses have difficulty recruiting workers because their employees cannot afford to live anywhere near the job.

And eventually the housing crisis becomes a transportation crisis, an economic crisis and a quality-of-life crisis.

This is why the answer cannot simply be, "Make rent cheaper."

Of course we want rent to be cheaper.

The question is how.

If we want landlords to compete for tenants, we need enough apartments that tenants have choices.

Imagine 1,000 prospective tenants competing for 100 apartments.

The landlord has the power.

Now imagine 1,000 prospective tenants and 1,200 apartments.

The landlord has a different problem.

He has to compete.

Maybe he lowers the rent.

Maybe he offers a month free.

Maybe he pays for parking.

Maybe he upgrades the kitchen.

Maybe he finally fixes the mysterious dripping faucet that has been dripping since the Reagan administration.

Competition has a funny way of improving customer service.

This is why increasing housing supply matters.

And there is another important piece of the puzzle: we need to make it economically rational to build.

Developers aren't charities. They invest enormous amounts of money, take enormous risks and wait years before they see a return.

If a developer looks at Los Angeles and sees land that costs millions of dollars, construction costs that keep climbing, years of approvals, expensive financing and regulations that can change before the project is finished, he may reasonably decide to put his money somewhere else.

And when he does, Los Angeles doesn't get the apartments.

Somebody else gets the investment.

Some other city gets the jobs.

And some other city gets the new housing.

This isn't an argument for allowing developers to build anything they want anywhere they want.

Cities need planning. Neighborhoods matter. Infrastructure matters. Good design matters.

But there has to be a balance.

A city cannot simultaneously say, "We desperately need more housing," and then make building housing so difficult, expensive and uncertain that almost nobody wants to build it.

That is like standing in a bakery complaining about being hungry while passing laws against making bread.

Los Angeles has a housing crisis because housing is scarce.

And housing is scarce because for decades we have not built enough of it where people actually want and need to live.

So perhaps the most sensible approach is not to choose between compassion and economics.

We need both.

Protect people from genuine abuse.

Preserve existing affordable housing where it makes sense.

Help people who genuinely need assistance.

But at the same time, build.

Build apartments.

Build townhomes.

Build accessory dwelling units.

Build near transit.

Build near jobs.

Build where infrastructure can support it.

Allow responsible increases in density.

Streamline the approval process.

Reduce unnecessary costs.

And give private investors a reason to put billions of dollars into creating the very thing we say we desperately need.

Because there is an old lesson in economics that politicians sometimes forget and developers never do:

You cannot regulate your way out of a shortage.

If there are too few apartments, we need more apartments.

If there are too few homes, we need more homes.

If we want lower prices, we need enough supply that sellers and landlords have to compete for buyers and tenants rather than buyers and tenants fighting one another for the privilege of paying the highest price.

Los Angeles does not have a shortage of people who want to live here.

It has a shortage of places for them to live.

And until we confront that simple fact, we can continue arguing about rent control forever.

We can hold hearings.

We can pass ordinances.

We can create committees.

We can commission studies.

We can print reports thick enough to stop a door from blowing open in a Santa Ana wind.

But none of those things will build an apartment.

A hammer might.

A construction crew might.

A willing investor might.

A sensible zoning law might.

And perhaps, if we are very lucky, a little common sense might help too.

Because housing is not created by wishing for it.

It is created by building it.

And Los Angeles has been wishing for a long time.

Perhaps it is time to start building.

Stay positive.  Remember, if you need a smile, I will lend you mine.