Although considered a liberal bastion, California is far less “tenant friendly” than its blue-state counterparts on the East Coast, a new study found.
According to research co-authored by UC Irvine housing economist Ed Coulson, the state ranked 15th in the nation in terms of tenant protections, behind Delaware, Rhode Island, Massachusetts and New York.
Even Alaska, Nebraska, Kentucky and South Dakota have stronger laws shielding renters from evictions, rent hikes and excessive security deposits.
“One might think that coastal blue states might have more tenant friendliness, but that’s not always the case,” said Coulson, director of UCI’s Center for Real Estate. “By our index, California is not even in the top 10.”
The study, which appeared in the May issue of the Journal of Urban Economics, tested a decades-old hypothesis that stronger tenant protections lead to higher rents and lower vacancy rates. The trade off might be lower eviction rates for some in exchange for higher rents for all.
“While stringent regulations may reduce evictions, they could lead to unintended consequences such as inflated house prices and heightened homelessness,” the study said.
To find out if that’s true, Coulson and co-authors Thao Le (Georgia State University), Victor Ortego-Martic (UC Riverside) and Lily Shen (Clemson University) created an index measuring each state’s tenant-protection laws.
They then compared those statistical rankings with metrics such as rental affordability, eviction rates and vacancy rates.
The study found that Hawaii ranked highest in the nation for tenant friendliness. Utah, on the other hand, had the strongest pro-landlord tilt, followed by Colorado, Idaho, West Virginia and Louisiana.
The study concluded that the academic hypothesis, for the most part, was right on the money — but with a twist.
Yes, states with stronger tenant protections tend to have tighter, less affordable rental markets.
Yet, the number of renters and landlords also increased in those markets. Renters are drawn to more tenant-friendly friendly places, and that higher demand increases the housing supply.
We asked Coulson to explain his findings. His comments have been edited for length and clarity.
Q: What was the purpose of this study?
A: There’s been a lot of attention paid to evictions in the past five years or so, especially because laws were passed to prevent evictions during the pandemic.
And so we got to thinking about what are the impacts of these laws.
And then we thought, well, there’s a whole set of laws that govern landlord-tenant relationships, and they’re all kind of interconnected. So, we went through the statutes one by one for each state, and picked out 12 laws that every state has a law about.
We combined them together in a statistical manner, and came up with this index of tenant friendliness for each state.
Q: What kind of laws did you base your index on?
A: There are laws governing security deposits. There’s laws about (lease) termination. There’s laws about what happens in the case of lease violation. There are laws about evictions.
For example, there’s one about the maximum security deposit, whether it’s one month’s rent or two month’s rent or five month’s rent.
Q: How does a higher ranking impact the housing market?
A: You would think that housing suppliers might react to this increase in tenant friendliness by saying, “OK, I don’t want to be a part of this housing market anymore. I’m withdrawing my supply in one way or another.”
And what that would do would be to make the housing market tighter for tenants. It would result, therefore, in higher rents, in lower vacancies, and perhaps in the extreme, an increase in the homeless rate.
And that is almost what happens.
It does mean higher rents. It does mean fewer vacancies. The statistics on this are a little bit fuzzy, but more often than not, it causes a small increase in the homeless rate.
But the surprise was there is also an increase in demand for living in these places. In other words, tenants see a tenant-friendly location, (and) that ups the demand for living in that particular location.
And that’s where the higher rents are coming from. It’s not really coming from a withdrawal of supply. What we see is an increase both in demand and in supply when there is more tenant friendliness.
Q: Your study mentions that eviction leads to negative social and economic consequences, including adolescent violence, poor school performance and poor physical and mental health. So, which is worse, the horrible social cost of evictions or higher rent?
A: Yeah, that’s a tricky question.
The trade off is eviction prevention for some people versus higher rent for everybody.
The higher rental payment is sort of like insurance against getting evicted. … It’s a modest rental increase in exchange for a lower probability of getting evicted.
Q: Each year, landlord groups and tenant’s rights groups go to battle in Sacramento, and for the most part, the landlords come out on top. Just 31 of California’s 539 cities and counties have rent control, according to Tenants Together. Three times, rent control reform has been on the state ballot, and three times it went down in defeat. Why don’t tenants have more political muscle in Democratic-dominated California?
A: It doesn’t seem like they get a lot of headway compared to some other places. New York City, for example.
Rent control is like the worst of both worlds, because if you impose rent control, you make it more difficult for landlords, but they don’t get any compensation for that.
With eviction laws, there’s compensation for the landlord because rents go up.
If you think that housing supply is the key to creating affordable housing, our study shows that the scales balance a little bit. The adjustment that the housing market makes in response to changes in these laws doesn’t defeat the road to abundant and affordable housing.
Q: What can lawmakers, landlords and tenants rights groups can learn from this study?
A: A couple of things. One is that one of the goals of tenants’ rights groups is to prevent evictions. And what our study shows is that, yes, tenant eviction laws and tenants rights seem to have an impact lowering evictions.
The other lesson I would take from this is that it’s not all bad news because the response of the housing market and increasing supply does ameliorate a lot of the negative consequences that people thought would happen if you created more tenants rights.
Ed Coulson
Title: Professor of Economics and Director of the Center for Real Estate
Organization: Paul Merage School of Business, University of California, Irvine
City of residence: Dana Point
Education: Bachelor’s in economics from UC, Riverside; doctorate in economics from UC San Diego
Previous jobs: Professor of Economics and King Faculty Fellow in Real Estate at Pennsylvania State University; professor of Economics and director of the Lied Institute for Real Estate Studies at the University of Nevada, Las Vegas.
