Increasingly Restrictive Laws won’t Fix Nevada Housing

Spencer Wong

Nevada lawmakers can’t seem to get enough of trying to interfere in the state’s housing sector.

Separate bills in the state assembly and state senate seek to ostensibly bolster affordable housing in Nevada, one through rent control and the other by state-funded construction.

Both bills passed out of their respective committees last month. This, despite the fact that rent control has been shown to be a disaster just about everywhere it’s been implemented, and government entities tend to do a poor job when it becomes involved in buying or building housing.

Senate Bill 426, sponsored by Sens. Pat Spearman, D-Clark, and Fabian Donate, D-Clark, would restrict landlords from increasing rents on existing tenants during the first year of tenancy. It would also limit increases 5 percent, based on changes in the cost of living, in succeeding years.

Assembly Bill 310, sponsored by Daniele Monroe-Moreno, D-Clark, would create a $32 million housing grant program focused on serving lower-income and disadvantaged residents.

The bills may be well intentioned, for there is no question that Nevada has a shortage of affordable housing that has driven up home costs and rental prices in recent years.

But the best way to put a pin in ballooning prices is to open more of the state for development. The federal government currently owns more than 80 percent of Nevada – the highest percentage of any state in the nation.

With so much land unavailable for building housing, costs have inevitably skyrocketed.

The idea behind SB 426, rent control, has been shown time and again to be bad policy. For decades there has been universal agreement that rent control destroys the incentive for property owners to maintain controlled properties and also dissuades the construction of new housing.

Swedish economist Assar Lindbeck once quipped, “In many cases, rent control appears to be the most efficient technique presently known to destroy a city – except for bombing.”

2017 review of rent control policies in San Francisco showed that renters of controlled units were 20 percent more likely to remain in those units to benefit from below-market rental rates.

Not surprisingly, landlords responded by reducing the supply of rental units by 15 percent, leading to a city-wide rent increase of 5.1 percent that largely fell on renters on non-controlled units.

AB 310, the subsidized housing construction program, would create the Nevada Supportive Housing Development Fund, which would seek to “reduce barriers to retaining housing caused by a person’s rental history, criminal history and income,” the disabled and those who are homeless or on the verge of being homeless.

Again, California can serve as an example as to why AB 310 is problematic. The Golden State has spent billions of dollars in recent years trying to address the program, yet the situation has only worsened.

According to the Hoover Institution, simply throwing money at the problem won’t work because “state and local government policies do not address the obvious supply-and-demand factors that are creating such large numbers of homeless people in California.”

California’s housing costs are outrageous because there is a shortage of homes and apartments in popular areas.

“The real estate market is telling California loud and clear that there are way too many people in the most densely populated California cities,” the Hoover Institution wrote in 2019. “But this important information is being buried because it would be political suicide for any politician to discuss these economic issues, lest they be construed as being insensitive towards the homeless.”

Nevada’s two largest cities have an advantage that the Los Angeles, San Diego and San Francisco areas do not. There is plenty of open land in Clark and Washoe counties. However, this land is owned by the government – 90 percent in the case of Clark County and 83 percent in Washoe County.

Housing and rental costs are very real issues in Nevada, but trying to rein in spiking rents through price controls and government-backed construction won’t solve the issue. Nevada must make more land available for development if it genuinely wants to make housing affordable for more of its residents.