Everyone agrees the most attractive areas in California suffer from a housing crisis that calls for drastic action. The difficult question is deciding what should be done. Many of the challenges are embodied in the small California town of Mountain View, population 80,000, which should be basking in sunshine as the home of Google. But instead the town is mired in discord and controversy over a set of well-entrenched anti-growth policies concerning housing. The tight supply of housing has raised the price of the median home to about $1.4 million. Rents, too, have skyrocketed, resulting in the displacement of many long-term tenants—teachers, nurses, and tech employees—who have to endure long daily commutes to work or find jobs elsewhere. Mountain View is now the proud home to numerous mobile home parks, occupied by individuals who crave access to the city—and who reportedly drive Teslas and Mercedeses, no less—but who lack the means to purchase or rent ordinary housing.

The situation in Mountain View has provoked two distinct responses. The first of these was the approval on November 8 of Measure V, a rent control statute that turns Mountain View’s rental market into a regulated public utility, complete with its own five-member board. The ordinance exempts all units built after February 1, 1995. But for the covered units, it rolls back rents to their October 2015 levels, and then limits rent increases going forward to between 2 and 5 percent, with allowances for higher increases if justified by extraordinary costs. The tenant groups that support the statute seek, without explicit acknowledgement, to secure a massive wealth shift in their favor, without discouraging future development. In so doing, they ignore the costs to other potential residents who put a higher value on those units, which will lead to a misallocation of available units whose number is kept artificially low by a wide range of entry constraints. The administrative costs of running this system for their exclusive benefit will, moreover, be borne by everyone inside the city. It is also likely that the threat of a new rent control law will weigh heavily on the market for exempt units, and will retard the ability to build new units as well.