I’ve been in California the last few days, and perhaps unsurprisingly, the anti-Prop 10 commercials have been inescapable. I’m not sure what the buzz around Prop 10 is elsewhere, but I thought I would put a couple words down in favor of the proposition and encourage others to vote for it (and register if need be).

Julian Smith-Newman had a short article on one of the LARB blogs about Prop 10 back in June, and so far, it’s the best primer on the proposition I’ve seen. You should read it, but in case you don’t (or just don’t want to), let me gloss the explanation here.

The rent-seeking interests in the state, that is—investment banks, building developers, and landlords, all push a simple but false narrative about rent control. As the story goes, the price of rent follows the laws of supply and demand. When a lot of rental units are available, demand goes down and landlords are forced to lower rents to attract tenants. When rental units are in short supply, demand goes up and thus landlords can charge more without worrying about attracting tenants.

Of course, in states with large populations like California, and in perennially attractive cities like Los Angeles and San Francisco, the demand for housing is always high. The market then provides investors and developers an incentive to build more affordable housing because they can expect a healthy return on their investment. If rent control is instituted, though, landlords can expect only a limited return on their investment. As a result, they will be forced to divert their investments into other, more profitable ventures instead of building more rental units.

But as Smith-Newman’s article makes clear, this narrative about the housing market is pure fantasy. Housing is not like most commodities where the price goes up and down based on supply and demand. In reality, housing works more like a financial asset. Investors, developers, and landlords are not driven by the market to build affordable housing to attract tenants and ensure a healthy annual return. The profit motive pushes them to make speculative investments in housing in an effort to receive the largest return possible at some future date.

The geographer Neil Smith developed one of the most influential explanations of this process with his theory of the rent-gap in the context of gentrification. Simply put, consumer demand does not drive housing markets, the profit motives of private developers combined with a supportive regulatory framework from government does. The only way to lower rents is to change one of the latter two. Rent control does this by limiting the market incentives for speculation by developers and price gouging by landlords.

The theoretical explanation is borne out by empirical evidence. Smith-Newman’s article highlights the experience of Massachusetts, where the removal of rent-control not only raised rents in the few cities that previously had rent-control laws but even raised rents across the entire state.

There is another study, this time of San Francisco, by two economists at Stanford’s School of Business (one a former Goldman Sachs asset manager and the other a former UBS investment banker) that purports to tell a different story. According to this study, rent control, at least eventually, drove up rents and spurred gentrification in San Francisco. This study has been making the rounds in an effort to get people to vote against Prop 10.

The study argues that rent control did lower rents and keep people in their homes, but in the long run, investors used loop-holes in the law to convert previous rental housing to condominiums, to redevelop buildings, or to sell them outright. With a cap on their potential returns, developers and landlords pursued other investments rather than increasing the stock of affordable housing. Rent control then, according to the study, fails in the long term even if it works in the short term.

Dean Preston and Shanti Singh of California’s Tenants Together have a long report refuting the article’s claims and highlighting its many flaws. I would encourage you to read both reports.

But you don’t even have to read the Stanford study to see that rent control works: the authors admit as much. If in the face of rent control’s success, landlords chose to exploit loopholes to get around the law, does that mean rent control doesn’t work? It seems like the more reasonable conclusion to draw is that rent control should be even more strict and far-reaching in order to prevent landlords from exploiting loop-holes in the law.

Housing is an incredibly complex issue, and rent control is no panacea. It’s undoubtedly true that California needs more housing, evidenced by the fact that most California residents are spending way too much of their income on housing, and the rates of homelessness have grown significantly in recent years.

But construction, even in the best of circumstances, takes time. Rent control is the only way to keep housing costs down right now. Ultimately, we need to decommodify housing altogether if we want to ensure that everyone has a safe, secure, and attractive place to live. In the meantime, rent control is a step in the right direction. The market cannot solve the problem, and in the case of housing, it only makes it worse.