Affordable Housing Institute : US

Rent control is bad public policy: bad from an economic perspective, bad from a social perspective.

 

I found this out first hand starting thirty years ago, and I’m still finding it out.

 

In the curious way of such things, my involvement with affordable housing began professionally and personally at roughly the same time.  Having graduated college wanting to be a sportswriter …

 

It was dark in the Seventies, very dark …

 

… I found my first post-college jobs working as a temporary typist, for a firm that raised equity capital for affordable housing investments, at almost the same time as I moved into the only apartments available in Cambridge: a rent-controlled one.  So even while by day I was typing offering prospectuses describing programs about which I then knew nothing, by evening and weekend I was living in a public-policy experiment going horribly awry.

 

Thirty years later, I’m still consumed with passion for both: for affordable housing, against juridical rent control.   

 

Why?  Because:

 

1. Affordable housing is good public policy from both a social and an economic perspective
2. Rent control is bad public policy from both a social and an economic perspective.

What’s wrong with rent control?  It’s supposed to help people, isn’t it?

 

Rent control:

 

1. Is usually enacted in a ‘temporary, emergency’ context (New York City enacted rent control in 1947 to cope with a perceived price spike from returning World War II GI’s) … but is virtually never voluntarily repealed. 
2. Virtually never goes away on its own.  Normally it takes a statewide referendum to remove.  (Massachusetts 1994)
3. Typically expands its mandate (Berkeley, CA), from rental, to condo conversion, to rights to purchase, to compulsion to rent (!) and prohibition against leaving vacant.
4. Always expands its grip, from regulation of rents, to dictates over capital improvements (or the funding thereof, which is the economic equivalent).
5. Although theoretically offering owners a ‘reasonable’ (note: not market!) rate of return, in practice always erodes owner return, degrading properties over time, leading to …
6. Adversely selects owners: good ones go out and bad ones come in.
7. Reduces resident mobility.
8. Builds a cumbersome and ever-expanding bureaucracy that comes to believe its mission in life is to squelch owners and squeeze cash flow out of properties.
9. Creates its own single-issue constituency of beneficiary tenant households, who gradually become ever more polarized (affectionately known in Cambridge for twenty years as “the rent control crazies”).
10. Eventually comes to benefit not those who need housing most, but those who by good fortune happen to live in it (in Cambridge, the Crown Prince of Denmark and the Mayor of Cambridge were among the lucky beneficiaries; New York has similar stories).
11. Leads to overconsumption by residents and a resulting gray market in sublets and other informal, undocumented transfers.
12. Gradually atrophies property (why improve it?).
13. Exacerbates rental housing shortages because no one builds new rental.
14. Shrinks rental supply (because everyone is looking for ways to convert out, and leaps upon these whenever it is possible).
15. Distorts markets and increases private rental costs.
16. Often leads to rental reduction ad absurdum (in Cambridge, for instance, it was for some time a criminal offense for a property owner to live in its own rent-controlled apartment!).
17. Slowly, inexorably, kills neighborhoods.

Whether your objection is common-sense economics, equity for owners, equity among renters, the health of property, or the health of cities, juridical rent control never makes sense.  (What does work is economically bargained affordability, where owners make market returns, residents receive truly affordable housing, and government funds the difference.)

 

But politically?  Ah, there it’s popular, in certain communities it’s the ultimate re-electoral short-term fix.

 

Seductive, addictive, destructive, fatal.

 

Heroin for neighborhoods.

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