Plus: A fresh lawsuit challenges New York’s rent freeze, a new analysis confirms that expanding supply benefits everyone, and the clash between data centers and clouded leopards.
Happy Tuesday, and welcome to another edition of Rent Free. This week’s newsletter includes stories on:
- A fresh lawsuit challenging New York’s rent freeze
- A new study confirming that additional supply benefits all groups.
- Data centers, clouded leopards, and eminent domain—what a mix!
But first, our lead piece examines the rise in homelessness in Los Angeles and what it reveals about how moves in housing markets propagate.
A Year After Wildfires Destroyed Thousands of Homes, Los Angeles Sees an Uptick in Homelessness
After a period of decline, Los Angeles has again reported growth in its homeless population.
Rent Free Newsletter overview. Find more of our coverage on urban regulation, development, and zoning.
According to the latest homeless census released by the Los Angeles County Homeless Services and Housing Department (LAHSA), which tracks figures across the entire county, the city of Los Angeles logged a 3.4 percent year-over-year rise in homelessness.
In total, 45,194 people are living in the streets or in shelters within the city limits. Countywide, the rise is smaller, at 1.2 percent, equal to 73,040 people experiencing homelessness across the region.
These numbers come from LAHSA’s point-in-time count, wherein volunteers enumerate everyone sleeping outside, in vehicles, or in shelters on a single January night. The federal government typically releases a national tally later in the year.
The increase in the city’s figures follows two years of steady decreases. Mayor Karen Bass framed those declines as proof of her team’s success in moving people off the streets.
Her latest remarks, however, took on a defensive edge.
“Our efforts ultimately couldn’t keep pace with policies and funding cuts at the federal and state levels that pushed more people onto the streets,” Bass said, attributing the uptick to a deficit in county services, reductions in federal support, and unspecified Trump-era policies that raise costs for gas, groceries, and rent.
Councilmember Nithya Raman, Bass’s rival in the mayoral race, attributed the growth to the mayor’s mismanagement.
The Trump administration has pushed several reforms aimed at reallocating federal homelessness funds away from “housing first” initiatives and toward temporary shelter, though many courts have blocked these changes.
In June, it even halted federal funding to LAHSA, the county agency, citing what it called a “wanton mismanagement of public funds.”
Even before that, Los Angeles’ own city programs often came under scrutiny for inefficiency and slow delivery of permanent supportive housing for the homeless.
The rise in homelessness comes a year after a major negative shock to the region’s housing stock caused by the 2025 wildfires. Approximately 12,900 households were displaced as homes were razed or severely damaged.
The Palisades blaze mainly struck affluent areas of Pacific Palisades and Malibu, while the Eaton Fire wiped out more moderately priced homes around Pasadena.
One might think that the destruction of high-value properties wouldn’t affect homelessness. Yet the logic of moving chains suggests otherwise. When a mansion disappears, its former residents must seek alternatives elsewhere, occupying housing that someone else would have used. The displaced person who would have settled into that higher-end unit then competes for lower-cost options, and the effect ripples through the market downward.
If you trace this chain across many moves, the loss of numerous upper-tier units translates into higher demand for the cheapest housing, tightening the market for those with the fewest resources and pushing some into streets or out of the region entirely.
This is the opposite of the moving chains that occur when new luxury stock is added. Luxury homes attract higher-income residents, who leave behind slightly less opulent homes that attract those moving from more modest residences.
As our third report explains, the final outcome of new high-end supply is more units overall and, presumably, lower bottom-end prices.
Supporters of supply-side strategies argue that moving chains show cities can tackle housing shortages and rising costs by permitting substantial new construction.
The latest homelessness figures in L.A. illustrate what happens when such housing isn’t created (or is destroyed): like a game of musical chairs, more people crowd the existing housing stock, and those with the lowest incomes either leave the region or end up without a permanent shelter.
The fires look increasingly like a negative supply shock from which the city will struggle to rebound for years.
Of roughly 5,000 single-family homes burned in the Palisades Fire, only 28 have been rebuilt and issued occupancy certificates.
Bass and Governor Gavin Newsom have at times moved to streamline wildfire rebuilding, while at other moments introducing new restrictions that hinder it.
A couple of weeks ago, this newsletter covered criminal charges brought against allegedly unlicensed contractors who offered help with wildfire rebuilds.
Diminished federal support and problematic local administration could be contributing to this year’s uptick in homelessness in the city.
Yet no level of federal assistance or more efficient local governance can fully erase Los Angeles’ regional housing shortage, which continues to force some residents into temporary or no shelters at all.
A New Lawsuit Alleges New York’s Rent Board Ignored Data When Imposing a Politicized Rent Freeze
Recently, a group of landlords filed suit against New York’s Rent Guidelines Board to overturn the rent freeze it imposed on the city’s nearly one million rent-stabilized homes.
Each year the RGB, composed of nine members, determines how much rents may rise on rent-stabilized units. In its decision, the board must weigh landlords’ operating costs, tenants’ cost of living, and the overall housing supply.
This year, facing rising costs for owners and growing incomes among tenants, the board set a 0 percent cap on increases.
The new lawsuit, brought in Richmond County Supreme Court (covering Staten Island), asserts that the board ignored data on landlords’ mounting costs and instead relied on biased data to justify a rent freeze that Mayor Zohran Mamdani had promised.
“To advance the Mayor’s agenda, this Board then distorted its statutory remit, resorting to several manipulations of its own data to rationalize this irrational outcome,” the petition states. “And this all occurs amidst rampant inflation and rising costs landlords must shoulder to stay afloat.”
“That Mayor Mamdani intended this result and took steps to stack the deck is now undeniable,” the petition adds, pointing to a statement by Christina Smyth, a board member appointed by Eric Adams who resigned just hours before the vote to freeze rents.
“The Rent Guidelines Board has ceased being a fact-finding entity. It has become a body that starts with an answer and works backward to justify it,” Smyth wrote in her resignation letter.
Arpit Gupta, a finance professor at New York University, was the RGB’s lone dissenter on the rent freeze. Gupta told Reason in a recent interview that he believed the Mamdani administration did not pressure the board unduly to vote a particular way.
Even so, Gupta notes, the independent board nonetheless chose a freeze after reviewing data showing landlords’ expenses outpacing incomes and the growing financial strain on rent-stabilized properties.
Christian Browne, an attorney with McLaughlin & Stern, says the fresh challenge to the rent freeze could struggle to prevail, given judges’ reluctance to overturn decisions made by independent agencies.
“Courts typically don’t second-guess administrative bodies. You usually need a clear legal error on their part,” Browne tells Reason.
For the petitioners to succeed, they must show convincingly that the board ignored the required data and instead acted on arbitrary political considerations.
Mamdani’s repeated commitments to a rent freeze combined with abundant data showing rent burdens rising could give landlords a strong case that the measure contravenes the law, Browne says.
Even if a court questions the freeze, the remedy would be unclear. Typically, if a court voids an administrative decision because of a conflict of interest, it would send the case back to the board with instructions to decide again excluding the tainted members. In RGB’s instance, where the charge is that a majority of the board was influenced, that route is less straightforward.
A court could, in theory, review the data itself and set a new cap, though that outcome is uncertain. Another possibility would be to remand the case to the RGB with instructions to reach a decision that relies more heavily on data justifying at least some rent increases.
Beyond this latest challenge to the rent freeze, a separate constitutional lawsuit targeting New York’s vacant-apartment rent limits, with the RGB named as a defendant, remains active.
New Study Reaffirms That Fresh Supply Benefits All Segments
A new working paper from the e61 Institute analyzes minimum-lot-size reforms in Adelaide, Australia, and finds that reducing the land required for new homes spurred the construction of smaller dwellings on compact parcels.
The study focuses on Campbelltown, a suburb in the Adelaide metro area, where minimum lot sizes were lowered from 350 square meters to as little as 150 square meters (3,767 to 1,615 square feet) in 2014.
The researchers describe this as a natural experiment, comparing Campbelltown with neighboring areas that did not adopt the smaller parcels.
They discovered builders quickly took advantage of the reduced lot sizes to subsidize larger townhome footprints, triggering a 67 percent surge in housing construction from 2014 to 2019, when reforms were partially rolled back.
On average, about 270 extra homes were added each year under the smaller-lot regime, culminating in a 6 percent growth in Campbelltown’s housing stock during the program’s duration. When the reforms were reversed, new construction declined.
The team also used census data to map the movement chains generated by the new supply in Campbelltown. Homes produced under the reforms were predominantly purchased by owner-occupiers who had previously rented, effectively freeing up rental units for others.
In essence, the new stock in one area opened additional rental options for younger residents across the broader Adelaide region.
This adds to a growing body of evidence suggesting that new supply at market-rate can free up housing for households across income levels across a metropolitan area.
Nashville’s Eminent Domain Clash: Clouded Leopards vs. a Data Center
Last week I reported on a turf war over a data-center project in Nashville, Tennessee. The Atlanta-based DC BLOX proposes a 69,000-square-foot facility on land adjoining the city’s zoo.
The site is already zoned to permit data centers. In fact, a smaller data facility currently sits within the same industrial park.
The zoo is opposing the plan, arguing that the constant hum from equipment could disturb its sensitive animals, especially the clouded leopards bred on the premises.
DC BLOX has pledged that its facility will operate more quietly than the zoning allows and has promised extra sound barriers to keep noise down. It has even offered to scale down the project.
That hasn’t placated the zoo or city leadership. Recently, Nashville’s Metro Council approved a temporary moratorium on data centers and advanced legislation enabling the city to seize DC BLOX’s land through eminent domain.
Read the full story here.
Quick Links
- The National Low Income Housing Coalition issues its annual Out of Reach report showing housing costs far exceed the means of many low-income households. Read my critique of past editions here.
- A Philadelphia resident has filed a first-of-its-kind suit against a landlord for using rent-recommendation software to set rents, violating a new city rule. Learn more about the concerns this software raises here.
- A suit argues that a California law mandating acceptance of Section 8 vouchers—and the accompanying inspections—violates the Fourth Amendment. Rent Free covered a similar challenge to Virginia’s voucher law.
- Read my latest feature on how New York’s rent law is draining the life from rent-stabilized housing.
- The Reason Foundation has released a new policy brief on reducing barriers to factory-built housing.
