By Robbie Sequeira, Stateline.org
With rents soaring since the COVID-19 pandemic tightened the housing supply, more local governments are considering rent control to keep increases in check and, ideally, protect struggling tenants whose incomes haven’t kept pace.
At the same time, some states are enacting measures to prohibit cities from adopting rent control, a policy that has long divided economists and housing experts.
Some policy analysts say restrictions exacerbate the housing crunch by keeping tenants in place longer than they’d otherwise stay. And some research has raised questions about whether the true beneficiaries are renters with low incomes or those with high incomes.
Rent regulation policies — known as rent control or rent stabilization — dictate how often and by how much a landlord can increase rents. More than 200 local governments have a rent control policy in place, according to the National Apartment Association, an industry group.
More local governments are working to join the list.
Late last month, Maryland’s Montgomery County — one of three Maryland counties to adopt rent control ordinances this year and the state’s largest at more than a million residents — capped annual rent increases at 6%.
In Massachusetts, Boston Mayor Michelle Wu and the City Council are struggling to push legislation that would exempt the city from the state’s 30-year-old rent control ban.
And in Seattle, the City Council in July debated a rent control proposal; but at an Aug. 1 meeting — amid chants of “housing is a human right” — the proposal failed on a 6-2 vote.
The bill would have created a trigger law that would go into effect in the event that Washington state’s 42-year ban on local rent control is overturned. Council member Kshama Sawant, the bill’s main sponsor, said during the vote that the bill was necessary to prompt the state legislature to repeal the law.
Housing shortages
In 2020, Montgomery County responded to the pandemic by passing an emergency rent control act that capped annual rent increases at 4%. When regular rent increases resumed in August 2022, rents in the county — where 40% of residents are renters — skyrocketed and more people were evicted, said Natali Fani-Gonzalez, a Democratic member of the Montgomery County council who introduced the rent control measure.
“This huge push for rent stabilization across city government is one of the consequences of the pandemic,” Fani-Gonzalez said.
The measure approved in July, which passed on a 7-4 vote, takes effect in October.
Fani-Gonzalez told Stateline that the new ordinance was “controversial” and contentious among the 11-person board but that she believes it will help ensure short- and long-term housing affordability.
“The heart of the whole piece of legislation is the cap for renting prices. … But managing to do so — that was a happy medium for renters and investment in our real estate,” she said.
“I saw this as an anti-rent-gouging effort, and during the pandemic, we had a measure in place that acted as rent control,” she added. “But it was temporary and when it ended, rent rose, and it put a burden on our residents.”
But Council member Gabe Albornoz, a Democrat who voted no, said he worried that it would disrupt the housing marketplace. Democratic Council member Marilyn Balcombe feared the bill would end up reducing the housing supply, pushing up prices.
State laws
In 2019, Oregon became the first to pass a statewide rent control law, capping increases at 7% a year plus inflation. Later that year, California followed by capping rent increases at 10% per year.
Both states have seen actions to expand rent control.
In Oregon, renters were stunned when last year’s high inflation led to legal rent increases of more than 14%. In response, lawmakers this year amended the law to cap rent increases at either 10% or 7% plus inflation, whichever is lower.
In California, voters could change the scope of rent control if they pass the Justice for Renters Act proposal in 2024. The ballot initiative would repeal the Costa-Hawkins Rental Act, a 1995 law that exempts single-family homes and condominiums, plus post-1995 construction, from rent control.
Dan Yukelson, executive director of the Apartment Association of Greater Los Angeles, said California’s rent regulation policies are “oppressive” on the rental industry, with many mom-and-pop landlords hamstrung by rising costs of managing properties.
Yukelson said one of the harms in a possible repeal of the Costa-Hawkins Act is the elimination of vacancy decontrol, which sets the rent amount at market or near market levels when the unit is vacant. He says the act helps smaller landlords compete in a tight California housing market.
“Smaller owners who just can’t deal with these layers of regulation are getting out of the (rental) business,” Yukelson told Stateline. “There’s a complete misunderstanding on the side of elected officials on what it takes to operate rental housing. So, either the government needs to run all the rental housing, or there needs to be some easing up on these regulations.”
At least 30 states preempt local governments from adopting rent control laws. Five states without statewide rent regulations — Maine, Maryland, Minnesota, New Jersey and New York, along with Washington, D.C. — allow rent control at the local level.
The National Multifamily Housing Council tracked 23 states that had measures related to rent control enactment in the works heading into 2023, but none has led to a statewide measure or repeal.
However, a few states were successful in strengthening preemption laws this year.
In March, Florida Republican Gov. Ron DeSantis signed off on a bill preventing local rent control.
Montana enacted a rent control ban on private and commercial property. State Sen. Steve Fitzpatrick, a high-ranking Republican in the Legislature, told Stateline that rent control measures could discourage landlords from investing in the state’s real estate market.
“This was a way for us to fill some of the gaps in our previous laws, where a particular cap measure could be implemented on certain property,” Fitzpatrick said.
So far this year, efforts to repeal these preemptions have fallen short.
Legislation that would have repealed Colorado’s 4-decade-old ban on local rent control died in a committee. Similar bills in Georgia, New Mexico and North Carolina also failed to advance.
Little consensus on rent regulation
Economists and housing experts disagree on whether rent control is effective. One challenge is that rent regulation differs so greatly from city to city, according to Jen Butler, a spokesperson for the National Low Income Housing Coalition, an advocacy group.
“This diversity in rent stabilization policies has resulted in mixed evidence as to the impact of them on the rental housing supply and rents,” Butler said in an interview. “These policies protect renters currently in homes covered by the policy from unaffordable rent increases — but they can also encourage these same renters to remain in place longer than they typically would, while renters in homes not covered by the policy are left without similar protections.”
Proponents of rent control, among them Rutgers University economist Mark Paul, say arguments against rent control lack empirical evidence.
“I think it’s important to note that rent control does not say landlords can’t profit off their property. That’s not the point of rent control,” said Paul. “Rent control is limiting the ability of landlords, or corporately owned property owners from raising the rent by 6, 8 or 12% a year and pricing people out of their homes.”
A 2021 University of Minnesota study published by the university’s Center for Urban and Regional Affairs suggests that rent control policies increased housing stability, and there is little evidence that those policies negatively impacted new construction — which is dependent on localized economic cycles and credit markets.
That same study, which reviewed rent control policies of four cities (Oakland, California; Newark, New Jersey; Sacramento, California; and Portland, Oregon) pointed out that there is debate on whether most rent regulation benefits are going to the neediest renters.
When Minneapolis floated the possibility of rent stabilization earlier this year, a study requested by the city council advised against it, suggesting it would not offer much help to city residents.
Rising rents
The No. 1 driver of long-term U.S. homelessness, housing policy experts and advocates said recently during a joint press call with media members, is rising rents.
“For 75 years, the long-term trend has been that the cost of modest rental housing has been going up faster than modest income,” said Steve Berg, chief policy officer for the National Alliance to End Homelessness.
Between 2019 and 2021, median rents went up by 12% for renters in households making less than $15,000, according to the Center on Budget and Policy Priorities, a left-leaning think tank.
Those increases, said Peggy Bailey, vice president of housing and income security for the center, “were not met with corresponding increases in income” and disproportionately affected Black and Latino renters.
According to 2017-2021 census data, more than 19 million renters in the United States are considered rent-burdened, spending more than 30% of their income on rent. In New York City, renters on average spend more than 68% of their income on rent, according to a January Moody’s Analytics report.
There also is a dearth of affordable rental housing. Low-cost rentals fell by 3.9 million units over the past decade, according to the Harvard Joint Center for Housing Studies’ State of the Nation’s Housing report.
In Indiana, which prohibits local rent control, Indiana University McKinney School of Law professor Fran Quigley has had his law students working closely with tenants in Indiana’s eviction court. Rent control, Quigley believes, could change housing outcomes in the Hoosier State, where evictions surpassed historical average levels in March 2022.
“I think rent control momentum is going to continue to build, because we have 44 million rental households in this nation and that’s a really powerful political block,” said Quigley. “Folks get mobilized, speak out, and rent control on the ballot does very well. … That works in the favor of momentum going forward.”
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