Some cities are pushing for rent control. They’re meeting resistance

The policy has long divided economists and housing experts.

By Robbie Sequeira, Stateline.org

With rents skyrocketing since the COVID-19 pandemic reduced housing supply, more local governments are considering rent control to keep costs in check and, ideally, to protect struggling tenants whose incomes haven’t kept up.

Simultaneously, some states are enacting legislation to prevent cities from implementing rent control, a policy that has long divided economists and housing experts.

According to some policy analysts, restrictions exacerbate the housing crisis by keeping tenants in place for longer than they would otherwise. Furthermore, some research has raised concerns about whether the true beneficiaries are low-income renters or those with high incomes.

Rent regulation policies, also known as rent control or rent stabilization, govern how frequently and by how much a landlord may raise rents. According to the National Apartment Association, an industry group, more than 200 local governments have a rent control policy in place.

More municipalities are attempting to join the list.

Maryland’s Montgomery County, one of three Maryland counties to pass rent control ordinances this year and the state’s largest with over a million residents, capped annual rent increases at 6% late last month.

Boston Mayor Michelle Wu and the City Council are working hard to pass legislation that would exempt the city from the state’s 30-year-old rent control ban.

In Seattle, the City Council debated rent control in July, but the proposal failed on a 6-2 vote on Aug. 1 amid chants of “housing is a human right.”

The bill would have established a trigger law that would take effect if Washington state’s 42-year ban on local rent control was overturned. The bill’s main sponsor, Council member Kshama Sawant, stated during the vote that the bill was necessary to prompt the state legislature to repeal the law.

Housing shortages

In response to the pandemic, Montgomery County passed an emergency rent control act in 2020, capping annual rent increases at 4%. Rents in the county — where 40% of residents are renters — skyrocketed when regular rent increases resumed in August 2022, and more people were evicted, according to 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 explained.

The July measure, which was approved on a 7-4 vote, goes into effect in October.

According to Fani-Gonzalez, the new ordinance was “contentious” and “controversial” among the 11-member board, but she believes it will help ensure short- and long-term housing affordability.

“The rental price cap is at the heart of the entire piece of legislation.” But doing so was a happy medium for renters and investment in our real estate,” she explained.

“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 continued. “But it was only temporary, and when it ended, rent rose, putting a burden on our residents.”

However, Council member Gabe Albornoz, a Democrat who voted no, expressed concern that it would disrupt the housing market. Democratic Council member Marilyn Balcombe was concerned that the bill would reduce housing supply, driving up prices.

State laws

Oregon became the first state to pass a statewide rent control law in 2019, capping increases at 7% per year plus inflation. California followed suit later that year, capping rent increases at 10% per year.

Both states have taken steps to broaden rent control.

Renters in Oregon were taken aback when high inflation last year resulted in legal rent increases of more than 14%. In response, lawmakers amended the law this year to limit rent increases to 10% or 7% plus inflation, whichever is lower.

Rent control in California could be expanded if voters approve the Justice for Renters Act in 2024. The Costa-Hawkins Rental Act, enacted in 1995, exempts single-family homes and condominiums, as well as post-1995 construction, from rent control.

California’s rent regulation policies, according to Dan Yukelson, executive director of the Apartment Association of Greater Los Angeles, are “oppressive” on the rental industry, with many mom-and-pop landlords hamstrung by rising property management costs.

One of the disadvantages of repealing the Costa-Hawkins Act, according to Yukelson, is the elimination of vacancy decontrol, which sets the rent at market or near market levels when the unit is vacant. He claims that the act helps smaller landlords compete in California’s tight housing market.

“Smaller owners who just can’t deal with these layers of regulation are getting out of the (rental) business,” Yukelson told Stateline. “Elected officials have a complete misunderstanding of what it takes to operate rental housing.” So, either the government should manage all rental housing, or these regulations should be relaxed.”

At least 30 states prohibit local governments from enacting rent control legislation. Maine, Maryland, Minnesota, New Jersey, and New York, as well as Washington, D.C., are the only states without statewide rent regulations.

The National Multifamily Housing Council tracked 23 states that had rent control legislation in the works as of 2023, but none resulted in a statewide measure or repeal.

This year, however, a few states were successful in strengthening preemption laws.

Florida Republican Gov. Ron DeSantis signed legislation prohibiting local rent control in March.

Montana prohibited the use of rent control on private and commercial property. Rent control measures, according to State Sen. Steve Fitzpatrick, a high-ranking Republican in the Legislature, 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 explained.

Efforts to repeal these preemptions have so far fallen short this year.

A bill to repeal Colorado’s four-decade-old ban on local rent control died in committee. Similar bills in Georgia, New Mexico, and North Carolina were also defeated.

Little consensus on rent regulation

Rent control is debatable among economists and housing experts. According to Jen Butler, a spokesperson for the National Low Income Housing Coalition, one challenge is that rent regulation varies so greatly from city to city.

“This diversity in rent stabilization policies has resulted in mixed evidence as to the impact of them on rental housing supply and rents,” Butler explained in an interview. “These policies protect renters who are currently in homes covered by the policy from unaffordable rent increases — but they can also encourage these same renters to stay in their homes longer than they would otherwise, while renters who are not covered by the policy are left without similar protections.”

Rent control supporters, including Rutgers University economist Mark Paul, argue that arguments against rent control lack empirical evidence.

“I think it’s important to note that rent control does not preclude landlords from profiting from their properties.” “That isn’t the point of rent control,” Paul explained. “Rent control limits landlords’ or corporately owned property owners’ ability to raise rents by 6, 8, or 12% per year, pricing people out of their homes.”

According to a 2021 University of Minnesota study published by the university’s Center for Urban and Regional Affairs, rent control policies increased housing stability, and there is little evidence that such policies had a negative impact on new construction, which is dependent on localized economic cycles and credit markets.

The same study, which examined the rent control policies of four cities (Oakland, California; Newark, New Jersey; Sacramento, California; and Portland, Oregon), found that there is disagreement about whether the majority of rent regulation benefits are going to the most vulnerable renters.

When Minneapolis proposed rent stabilization earlier this year, a city council-commissioned study advised against it, claiming that it would not benefit city residents.

Rising rents

Rising rents are the No. 1 cause of long-term homelessness in the United States, according to housing policy experts and advocates during a recent joint press call with media members.

“For the past 75 years, the cost of modest rental housing has risen faster than modest income,” said Steve Berg, chief policy officer for the National Alliance to End Homelessness.

According to the Center on Budget and Policy Priorities, a left-leaning think tank, median rents for renters earning less than $15,000 increased by 12% between 2019 and 2021.

According to Peggy Bailey, the center’s vice president of housing and income security, these increases “were not met with corresponding increases in income” and disproportionately impacted Black and Latino renters.

According to census data from 2017 to 2021, more than 19 million renters in the United States are rent-burdened, spending more than 30% of their income on rent. According to a January Moody’s Analytics report, renters in New York City spend more than 68% of their income on rent.

There is also a scarcity of affordable rental housing. According to the Harvard Joint Center for Housing Studies’ State of the Nation’s Housing report, low-cost rentals have declined by 3.9 million units over the last decade.

Fran Quigley, an Indiana University McKinney School of Law professor, has had his law students work closely with tenants in Indiana’s eviction court, despite the state’s prohibition on local rent control. Quigley believes that rent control could improve housing outcomes in Indiana, where evictions surpassed historical average levels in March 2022.

“I believe rent control momentum will continue to grow because we have 44 million rental households in this country, which is a really powerful political block,” Quigley said. “People become mobilized, speak out, and rent control on the ballot performs admirably.” That works in favor of forward momentum.”