The 20 people who originally couldn't find houses in SF (who formerly would have needed to bid $4), can bid $2 on some of the formerly rent controlled houses. They get leases.
If the market rent is $4, and the control is $1, and the control disappears, why on earth wouldn't the landlords in possession of the formerly-controlled properties immediately raise their prices to the market price?
[0] http://www.ezracompany.com/2012/04/30/why-do-landlords-let-s...
Obviously it will be lower than $4, but what?
If there's 100 houses there will more supply and the market rate will drop. Basically market rent is simply the price at the available margin.
There's probably not 120 people, and 100 houses. I think it's 500 people and 100 houses. Higher rent has driven a lot of people out who would have preferred to stay but couldn't because of the price.
Rent control is the only thing keeping some of them here.
- written from my cold, moldy dying home in the Sunset.
A rational person holding out for the "right" renter willing to pay the higher price would lower their prices sooner, but as previously established, people are not rational. Given the landlords that are holding multiple properties, they may just let the surplus profit soak up the loss from leaving the place without tenant.
Hiou linked a few good (and actually rational) reasons why this may happen, as well: http://www.ezracompany.com/2012/04/30/why-do-landlords-let-s...
The end result is that it's not as simple as ECON101 supply and demand.
Civilization, OTOH, cannot exist for arbitrarily long times (the heat death of the universe presents a pretty firm outer boundary), so the fact that the market can stay irrational for arbitrarily long times, but not forever, should not be seen as reassuring, or even meaningful.
Or, to quote Keynes, "In the long run we are all dead. Economists set themselves too easy, too useless a task, if in tempestuous seasons they can only tell us, that when the storm is long past, the ocean is flat again."