Freedom or Control: The Hidden Cost of California's Rent Cap

Real Leadership: President Trump

As the co-CEOs of Alejos Capital Group, we are writing to address what we believe to be not just a policy misstep, but a potentially catastrophic detour from the path of economic liberty. The recent decision by California to impose a 10% rent cap above market value during wildfires is more than just an overreach—it’s a clear signal of distrust in the mechanisms that have consistently proven their resilience and fairness: free markets. Let’s cut to the chase. This policy is not the safety net it claims to be; it’s a tripwire for economic stagnation.

Why Free Markets Aren’t Just a Theory—They’re a Lifeline

William Blackstone, one of history’s sharpest legal minds, argued for the sanctity of private property, the inviolability of contracts, and the inherent danger of unchecked government power. These principles are as vital today as they were in his time. California’s rent cap violates these tenets, and as business leaders, we cannot remain silent on this issue.

1. Private Property Rights Are Sacred—Full Stop
   Imagine telling a chef they can’t adjust their prices when ingredient costs spike. Absurd, right? Yet that’s precisely what California is doing to property owners. Blackstone’s assertion that private property is a natural right isn’t just philosophy; it’s common sense. Emergencies shouldn’t become excuses to strip individuals of their fundamental rights. Setting this precedent risks unraveling the very freedoms that make our economy strong.

2. Contracts Aren’t Just Paperwork—They’re Trust in Action
   At Alejos Capital Group, we live by the principle that trust is the currency of commerce. Rent agreements represent a handshake between landlords and tenants—a shared understanding of value. Government-imposed caps disrupt this balance, turning trust into a casualty of interference. When contracts can’t be relied upon, the whole system begins to wobble.

3. Economic Overreach: The First Domino in a Dangerous Chain
   Blackstone warned against the slow creep of despotism. Start with rent caps, and before long, you’re regulating wages, goods, and services. This isn’t a slippery slope; it’s a well-worn path to stagnation. California’s policy may seem like a temporary fix, but the long-term cost is a chilling effect on investment, innovation, and entrepreneurship.

4. Free Markets: The Original Crisis Managers
   History has shown us that when the chips are down, free markets don’t just survive—they thrive. Why? Because they’re adaptable, responsive, and fair. Higher rents during crises signal landlords to make improvements, expand availability, and address urgent needs. Rent caps, on the other hand, create shortages and reduce quality—exactly the opposite of what’s needed.

5. The Government’s Role: Coach, Not Dictator
   Governments should empower, not micromanage. Subsidies, tax incentives, and streamlined regulations are tools that respect market dynamics while addressing crises. California’s approach, however, feels more like a referee changing the rules mid-game.

Addressing the Counterarguments

No debate is complete without addressing the other side. Advocates of the rent cap policy argue that such measures are necessary to prevent price gouging, protect vulnerable renters, and ensure housing stability during emergencies. Let’s take these one by one:

1. Price Gouging vs. Market Signals
   While the term “price gouging” evokes emotional responses, it’s critical to understand that higher prices during crises are not arbitrary greed—they’re signals. They incentivize landlords to provide more housing options, encourage efficient resource use, and draw new suppliers into the market. Capping rents suppresses these signals, creating shortages and leaving tenants worse off in the long run.

2. Protecting Vulnerable Renters
   There is no doubt that emergencies disproportionately affect vulnerable populations. However, rent caps are a blunt instrument that often backfire. They reduce the incentive for landlords to maintain properties, limit housing availability, and discourage new construction. A better approach would be targeted assistance, such as direct rental subsidies or emergency housing programs, which directly address tenant needs without distorting market dynamics.

3. Housing Stability
   The argument that rent caps ensure stability ignores their unintended consequences. Artificially low rents discourage investment in housing stock, leading to long-term disrepair and limited availability. Stability achieved through government mandates is illusory; true stability comes from a robust, dynamic housing market that can respond to demand without artificial constraints.

A Playbook for Resilience

At Alejos Capital Group, we believe California can address the needs of wildfire victims without sacrificing economic freedom. Here’s how:

• Offer direct financial support to those displaced by wildfires.

• Simplify housing construction regulations to increase supply.

• Provide tax breaks for landlords offering emergency housing solutions.

These solutions honor private property rights while delivering real relief where it’s needed most.

The Bigger Picture

Let’s be clear: This isn’t just about rent caps. It’s about the values that underpin our society. Free markets aren’t just efficient; they’re equitable. They create opportunities, foster innovation, and reward resilience. By undermining these principles, California risks not just economic stagnation but a loss of trust in the very institutions that make prosperity possible.

At Alejos Capital Group, we’re not just advocates for free markets—we’re proof of their power. We’re ready to partner with policymakers, businesses, and communities to build solutions that respect property rights, honor market dynamics, and deliver real results.

Let’s not let shortsighted policies dim the bright future we can build together. The time to act is now.

Sincerely,

The Alejos Capital Group Team