Price caps invariably kill supply.

(All of what follows is not a criticism of the usual rent control, but of the extreme form of rent control called “vacancy control.”)

Vacancy control aims to cap the price of rents to new renters. But capping the price of goods below market price always leads to inefficient use of those goods and the collapse of supply. Just look at the gas crisis of the 1970’s; where price caps turned a minor price adjustment into a disastrous loss of supply: (http://www.washingtontimes.com/news/2006/may/15/20060515-122820-6110r/) .

Apartments are no different: Price caps encourage inefficient use of gas (wasteful driving) and apartments (cheap rent means not having to rent out a spare bedroom, or using an apartment part time or as a weekend retreat.) And price caps discourage new supply (digging new oil wells or building new apartments or pulling super cheap rentals off the market). Price caps also create black markets and the reselling on of the goods at well above market price (illegal subletting/fraud.)

An example of price caps causing inefficient use of housing supply would be where a $1000 per month 2-bedroom apartment is occupied by a single person. But in a $2000 a month 2-bedroom you might find two roommates. This creates a home for an additional person and helps ease any housing shortage. And since more demand has been satisfied it will lower the market price of all other apartments throughout the city. Thus a higher price for one apartment leads to lower prices for all other apartments – it sounds irrational, but any economist will confirm it is completely rational.

If I were a landlord forced to rent out an apartment for $900 that should go for $2000 I would leave it vacant. The rent control fees, gas and water costs, maintenance and hassle means it just would make more sense leaving it empty. Plus if it is rented out at $900, then that renter will never, ever move out. Better to leave it empty and wait till a change in the law, or even demolish the whole thing. Thus price caps will have directly caused loss of supply.

It is also common that when a low rent apartment comes available it will go the well connected. (As, doubtless the wealthy and powerful were unaffected by the gas crisis). So much for the working class benefiting. https://www.dnainfo.com/new-york/20140430/new-york-city/rent-stabilized-apartments-are-being-occupied-by-millionaires-records-show

Price caps should only be constitutionally legal in a monopolistic situation. If all the apartments in Santa Monica were owned by one company then that would be a monopoly. But clearly it is not so, and there is brisk competition between all market rate housing providers. 

Once a tenant has rented an apartment, there is an argument that they could be protected from eviction or excessive rent increases, as moving apartments is a costly and difficult process. That is the current situation in Santa Monica. And there may be some merit, and little harm in the current milder form of rent control. - But vacancy control is utterly self-destructive.

Political rationale for strict vacancy control includes:

1. It costs nothing to legislate into place and, unlike the gas crisis, the damage is inflicted slowly and insidiously over time. Thus the renters who can’t find a home at any price don't understand why it's happening and can only cry out for more rent control, which would be like pouring gasoline on a house fire.
2. It sounds like you are helping the poor. (But often the wealthy and well connected get low rent places.)
3. Cheap rents for everyone! (How about gas as well? Which is just as essential to modern life.) But of course only a lucky few get the low rents and cheap gas. The rest face dry pumps and no vacancies at any price.
4. In Santa Monica the fees have created the Rent Control Board, a captive bureaucracy whose very jobs depend on the survival of rent control. This creates a powerful political lobby.
5. Renters already in low rent apartments feel trapped and are fearful of the loss of rent control. They think that vacancy control will give them a chance to move without high rents. (But they never will snag such a rare unicorn. And their buildings will be in ruins and facing demolition as the owners fight bankruptcy.). Those renters are captive voters of politicians who preach the vacancy control nonsense.
6. It is claimed that vacancy control will discourage owners from harassing low rent tenants into leaving. But in reality such cases are very rare, and Santa Monica has very strict laws and heavy penalties, even imprisonment, against such harassment. If such harassment were common we would see an army of owners being locked up but instead we see at most one or two relatively minor cases that get trumpeted by the city as an out-of-control wave of criminal harassment sweeping the city. That fanning of fear keeps renters voting for those who now trumpet vacancy control.

And when vacancy control has killed all supply, the next step is a government-managed waiting list. And then you end up with 20-year waits for an apartment, as currently happens in Stockholm, Sweden. https://www.theguardian.com/world/2015/aug/19/why-stockholm-housing-rules-rent-control-flat and http://www.bbc.com/capital/story/20160517-this-is-one-city-where-youll-never-find-a-home

The real cause of high rents is lack of supply, caused by restrictive zoning, gold-plated parking requirements, building offices at the expense of housing and high permit fees that cripple new construction.  Of course when new construction is proposed everyone protests, but more rent control gets loud cheers. But where will all those who don’t snag a bargain rent live when there is no new construction?

Trying to legislate away the loss of supply caused by price caps only makes things worse. The government has tried (many times in many different ways) to cap the price of gasoline and always ended up with dry pumps and fist fights in the resulting lines. The Swedes aren’t fools (apart from when it comes to rent control) and the best result they have come up with is 20-year waiting lists, and a huge black market of illegal subletting that leaves sub-tenants renting at gigantic markups with no protections. They tried it in Santa Monica before and ended up with crippled supply and decrepit ruins for buildings. “Oh it will be different this time!” They will cry. No it won’t. There is no way to avoid the inevitable consequences of what will happen.

Santa Monica in the 1980’s really was in a distressing state. We are lucky (no, very unlucky) to have a real example of what really happened when vacancy control existed in Santa Monica, and what will happen should it come back. Santa Monica really was called “Skidrow-on-sea.” The apartment buildings really were decrepit slums. There really was a ‘demolition derby’. People visiting from other cities really were appalled by the horrific, crumbling, Eastern-Bloc appearance of the place. (What a coincidence: Stalin believed in price caps too.). It really will all happen again, should 1506 pass.