With about half of American renters spending more than 30% of their incomes on housing, advocates in cities and states across the country are building efforts to revive rent control policies.
In February, Oregon became the first state to impose a statewide rent control policy. And lawmakers in New York, Washington and California have proposed bills they say will protect tenants and allow low-income individuals to find reliable housing.
But why now? Is rent control is the best approach to lessen displacement and create affordable housing for all?
The Cases For And Against Rent Control
“Economists are still united that rent control has a lot of side effects, and it clearly has benefits, as well, for the people that are protected by rent control laws,” Palmer said. “And I think that’s why it keeps coming back. We have an affordability crisis and there is a deserving set of people that are renters and they’re struggling.”
“There are these benefits from having affordable housing units for low-income tenants. My research shows that you can think of rent control and affordable housing policies more broadly as providing insurance … if the loss of a job, for example, leads one to also lose one’s house,” Van Nieuwerburgh said. “I think as long as needy households are the ones who are ultimately the beneficiaries of this insurance … there can be large benefits from provisions of this insurance [that are] large enough to outweigh these costs.”
Palmer: “Rent control does a good job at helping current residents stay in their home, but it arguably backfires at making affordable housing more accessible. That is the pernicious effect of the fact that if you’re going to cap rents, it’s going to reduce incentives for people to supply housing. That might not be new housing — modern laws try to keep full incentives for supplying new housing — but people are more likely to convert to condos or to occupy their own unit. So we have a lot of leakage from the system. Rents end up rising for everybody else. It becomes harder to find a rent controlled apartment — everyone is staying there for a long time — and it makes the problem worse.”
Does Rent Control Benefit Those Who Need It Most? Not Always.
Palmer: “Often, the landlords we’re talking to feel very squeezed. And I’ve talked to landlords that say, ‘The tenants that I’m renting to make much more than I do and I’m subsidizing them while I’m being squeezed with costs rising for me.’ ”
Van Nieuwerburgh: “[Rent control] creates, in my view, a lot of housing misallocation, where the wrong type of tenants ends up in a lot of these affordable housing units. Maybe they were low-income when they first qualified for these units, but then over time, because they’re aging, their incomes go up and they make actually quite a lot of money, yet they’re allowed to stay in these units. So I think this housing misallocation problem is also an important feature.”
How Do U.S. Cities And States Value Housing Stability, And What Are Its Benefits?
Van Nieuwerburgh: “This boils down to, as a society, where do we want to fit on that tradeoff between efficiency and redistribution equality? All of economics comes back to, where on the spectrum do you want your society to be? The fact that a lot of Democrats have returned to rent control, in a lot of different places, has kind of tilted that balance towards more redistribution, more equality, and I think this is a good thing.”
Palmer: “People will look at the data and say, ‘Where are the promised rent decreases now that we’ve had a little bit of an increase in supply?’ … I don’t think what we mean — and we need to do a better job communicating this — is that an increase in supply is going to lead to outright decreases in rent. The idea is that the problem will be even worse if we don’t continue to build. And so I think that’s one of the pressures that we see in areas where foreign money is coming in, or areas where there are other pressures on price, and homeownership becomes unattainable.”
Van Nieuwerburgh: “There’s something to be said for having socioeconomic diversity at the neighborhood level. I think part of what is driving this push for more affordable housing is this idea that cities like New York City are losing 50,000, 100,000 rent-stabilized housing units pretty much every year for four decades now, and it’s affecting the ability of having economic diversity in every part of the city.”
What’s Happened In Oregon?
“Here in Oregon, we saw tenants who had been longtime tenants suddenly displaced with just a 30-, or 60-, or a 90-day notice, even though they had been paying their rent on time for years, following the contract and being great neighbors,” Fagan said of life before the state’s new rent control laws. “After a first year of tenancy here in Oregon, we’ve now banned the practice of no-cause evictions. The landlord will actually have to have a legitimate cause in order to kick someone out of their home. And then, second, we have [added] a rent stability feature to our new law, which provides that during a tenancy, a landlord cannot raise the rent by more than 7% plus inflation. So roughly 10% per year.”
Unaffordable Rent As A Statewide Issue
“Oregon has the highest rate of homeless kids per capita of any state in the country. And Multnomah County, which is that big county that really encompasses Portland [the most populous city in Oregon], and the Portland metro area, is not even in the top 50% of Oregon counties facing homeless students,” Fagan said. “And we know that rent-driven homelessness is really the leading cause of homelessness here in Oregon. And so it really is a statewide problem, and it needed a statewide solution.”
Balancing Rent Control With An Increase In Affordable Housing Stock
“We want to make sure that we’re not disincentivizing development, because we are about 150,000 units short, statewide, right now in Oregon. And so we need to be building units, and we’re taking a ‘yes, and’ approach, not an ‘either, or’ approach,” Fagan said. “We have some other legislation that hopefully you’ll be hearing about soon, where we are considering statewide banning of single family zoning in Oregon, and making sure that we can allow duplexes, triplexes, quadplexes on any property that otherwise meets city sighting and design requirements.”
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