Housing Human Right Stanford study rent control

Stanford Study On San Francisco Rent Control Is Flawed and Misleading

In News by Housing Is A Human Right

An anti-rent control study by Stanford University professors pleased Wall Street landlords and made headlines — but is so flawed that reporters, elected officials, and the public must seriously doubt its validity. The unsound claims by the professors  —  former Wall Street employees  —  that rent control has increased gentrification in San Francisco are entirely misleading.

Housing Is A Human Right conducted a detailed analysis of the Stanford study, “The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality: Evidence from San Francisco,” by professors Rebecca Diamond and Tim McQuade. It is unsound in multiple ways.

Among the major flaws, the report limited its scope to 2–4 unit buildings in San Francisco  – a small fraction of apartments in the city — only attempted to calculate the economic benefits to tenants who lived in rent-stabilized units between 1994–2012; and blamed condo conversions on San Francisco’s rent control laws, instead of the many loopholes in California law, like the Ellis Act, which permit them.

Before Diamond and McQuade took positions at Stanford, Diamond was a Goldman Sachs asset manager and McQuade worked for UBS Investment Bank. Both have a history of scholarship that seeks to minimize the effects of gentrification on the middle-class and low-income people. Their work has even argued the drawbacks of building low-income housing in richer neighborhoods.

The flawed Stanford study was not thoroughly peer reviewed and has gone through at least three drafts, with different datasets: all to produce a pro-Wall Street, pro-corporate landlord narrative. Despite this, the authors had to admit that rent control provides stability and economic benefits to tenants, beginning with $7.1 billion in the first draft of their study, then ending at $2.9 billion their most recent draft after a switching-out of datasets and methodology.

Diamond and McQuade also used limited mathematical models that don’t take into account the real-world damage that corporate landlords are causing in neighborhoods, and they are mum on the key factor exclusive to the Bay Area: huge salary inequities that let tech workers lay down $4,000 a month in rent.

Top academics, in fact, at USC, UCLA, and UC-Berkeley have found that rent stabilization policies are a key step to solving California’s housing affordability and homelessness crises.

University of Southern California Professor Manuel Pastor, co-author of the USC Dornsife’s Rent Matters report, said: “The housing crisis requires a range of strategies, [and] moderate rent regulation is a useful tool to be nested in broader strategy. It has fewer damaging effects than are often imagined, it can address economic pain, and it can promote housing stability. And housing stability matters because it is associated with physical, social, and psychological well-being; higher educational achievement by the young; and benefits for people of color.”

Many reporters continue to miss the key story here: Diamond and McQuade ignored stunning new wealth inequality, real estate speculation, and insufficient tenant protections as the causes of San Francisco’s rabid gentrification. What is left of the working class in San Francisco is due to the city’s longtime rent control and tenant organizing.

Click here to view the brief summary about the serious flaws of the Stanford study.

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