This guest post is from the Executive Director of the Apartment Association of Greater Los Angeles, Daniel Yukelson. This is an edited version of his original article. You can read the full article here.

Our state legislature and Governor Newsom like to refer to Assembly Bill 1482 as an “anti-price gouging” measure, which it is not. It is pure and simple price controls and regulation in the continuing war on rental property owners. It seems that renters in California along with our elected officials have no grasp on the economic impacts of price controls. Perhaps they should consult with the more than 90% of economists surveyed that have come out against rent control. As Swedish economist and Socialist, Assar Lindbeck, once said: “In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing.” The time has come to paint the color of our state brown rather than golden. 

So, why would so many economists come out against rent control? Well, just look at the impacts of Federally mandated gasoline price controls during the 1970’s. They resulted in severe shortages at the pump – for those that can remember, we could only buy gasoline a few days each week, and we experienced long lines at the “pump.” The same has become true when it comes to rental housing. Rent control is just another form of price controls, and the result of 40-plus years of rent control and tenant protection regulation has been severe housing shortages, particularly shortages of affordable rental housing, skyrocketing rents, gentrification and rapidly growing homelessness populations. Price controls never work and won’t solve the severe housing shortages we find ourselves living under – they do not produce one unit of new housing. 

Despite the voters’ loud rejection of the Proposition 10 ballot initiative for statewide rent control, our state legislature and governor pushed it through this year anyway. So now, we Californian’s are “stuck” with Assembly Bill 1482. As a result, here’s a short synopsis of what we can expect for high-demand, limited supply areas in California: 

• Owners will scrutinize tenant applicants and be far more selective. Gone are the days of taking a chance on the lovely couple that seems to have potential – why take a chance of getting into a situation that might only result in a “just-cause” court battle? 
• Owners will raise rents consistently every year and up to the maximum allowable amount. Gone are the days of forgone rent increases knowing that someday you can “catch-up.” 
• Tenants will be reluctant to give-up their rent-controlled units, forgoing opportunities to buy property of their own, forgoing job opportunities, commuting long distances to work, or staying in place long after the children have gone and the 3-bedroom unit no longer suits their needs. As a result, there will be far fewer rental units available for the next individual or family that needs one. 
• Over time, renters will be far less likely to want to own property of their own. Yet, property ownership in the U.S. has been one of the primary paths to financial security and to achieving the American Dream. Some of the many wealthy renters may choose to purchase property of their own, but never give up their rent controlled apartment near the ocean that is being kept as a “weekend pad,” and which then keeps rent controlled units off market and unavailable to the next family or individual in search of housing.
• Gentrification will continue at a rapid pace – study after study has proven that higher income earning renters are the ones that mostly benefit from rent regulation. Rent control is all about average income property owners subsidizing the lifestyles of their wealthier renters, and that’s completely unfair. 
• Available rental units will be reduced as owners begin looking for the “exit ramp,” by converting their properties into condominiums or other non-rental uses. 
• Owners will defer maintenance to make-up for lost revenues and to conserve their cash flow. A likely outcome in many neighborhoods could be blight.
• Rent regulations and price controls will surely end up discouraging investment in housing. As a result, any attempt to “make-up” the housing deficit to meet ongoing and growing demand for rental housing will be a “flat-out” failure. 
• Assembly Bill 1482 is merely like a “gateway drug” that will encourage more and more local jurisdictions to adopt more restrictive forms of rent control and tenant protections in an effort to pander to a vocal and well-organized population of renters. 

These expectations are not based on theory or guesswork – sadly, we have seen these scenarios playout over and over again during the past four decades or so that we Californians have suffered under rent regulations and price controls. Our elected officials just don’t get it. Like the definition of “insanity,” you just can’t keep trying the same thing over and over and expect a different result! 

Bye, Bye to Uber and the Rest of the “Gig” Economy? 

The passage this year of Assembly Bill 5 will eventually kill what is known as the “gig” economy by eliminating most, if not all, independent contractors. This new law will drastically change the way that freelancers and people in the so-called “gig economy” are paid moving forward. The law reclassifies what constitutes an “independent contractor” as a way to increase benefits for employees – which means higher costs for employers and more payroll taxes for California. The law will negatively affect truck drivers, freelance journalists and contributors, and ride share drivers among many others. 

Companies such as Uber and Lyft for ride sharing, Rover and Wag for dog walking and babysitting, and Grub Hub for food delivery will ultimately cost us Californians far more for these services. Of course, there’s always a chance these services won’t continue servicing us here in California and may eventually become a thing of the past. That’s sad. 

Some of these “gig” economy companies, such as Uber, are very new and do not yet make money. So, if they cannot make it on their current business model, the additional expense of adding thousands of employees will certainly not help their ability to survive. How many of the thousands of Uber and Lyft drivers will eventually be out of work because Sacramento has made a land-grab for more payroll taxes. In the apparent attempt at “fairness” to treat “gig” economy independent contractors as employees giving them all the benefits of employment (e.g., healthcare, retirement, etc.), this whole scenario really seems a far cry from fair. Who in their right mind thinks we Californians are better off without Uber or Lyft? Watch out, this might only be the beginning. 

The legality of the new law is under question as freelance journalists have filed suit to try and block the law from taking effect after it was announced by a national online news service that they would not renew contracts with freelancers from California because the state requires them to be paid minimum wage as well as be given benefits and perks typically reserved for employees. Gig economy company Uber has threatened to refuse implementation of the law’s changes. Let’s just keep our fingers crossed! 

Our Once Great “Gold Rush” is Quickly Becoming a “Gold Exodus.” 

With nearly 400,000 restrictions written into our laws and our ever-increasing tax burden, the fuel that has driven our economic engine may soon be flaming out. The California of today has too few available affordable housing units to meet demand and has no prospect of ever meeting that demand given the cost and regulatory burdens of doing business here. 

The California of today is losing thousands of its citizens, many of whom are the State’s millionaires, to other more financially attractive and business friendly states, and in their place, California is gaining thousands of new immigrants many of whom are in need of costly services while they gain their footing in a new country. The California of today is a large and growing bastion of homeless populations with no real, workable solutions coming out of Sacramento or from our local elected politicians – they’ve merely chosen to pick on the one group that is actually providing housing, we rental property owners, as the blame for all the homelessness and mental illness we see on our streets today. 

Dear Legislator, be careful what you wish for and watch out for the unintended consequences of your regulations. This is not the California I grew up in and certainly not the California my family came to decades ago. While the weather is still great virtually all year round in spite of the seemingly endless wildfires, a cold strong wind has begun blowing down upon us from Sacramento and very soon the skies will turn cloudy and gray. The dark shadow of California political ineptitude will soon be thrust upon all of us. Stay tuned or take the next exit! 

Daniel Yukelson is currently the Executive Director of The Apartment Association of Greater Los Angeles (AAGLA). As Certified Public Accountant, Yukelson began his career at Ernst & Young, the global accounting firm, and had served in senior financial roles principally as Chief Financial Officer for various public, private and start-up companies. Prior to joining AAGLA, Yukelson served for 12 years as Chief Financial Officer for both Premiere Radio Networks, now a subsidiary of I-Heart Media, and 3 years for Oasis West Realty, the owner of the Beverly Hilton and Waldorf Astoria Beverly Hills where he was involved with the development and construction of the Waldorf.