Affordable housing, the Holy Grail of urban living, seems to be an elusive goal. It is a talking point for politicians across the ideological spectrum. In attempts to create affordable housing for low-income individuals and families, many states look to rent control as a vehicle to affordable housing. Many turn to rent control as the knight in shining armor, but I wish to remove the shiny armor and expose the chinks in these economic polices. There certainly are policies that state governments can enact that help provide affordable housing, but rent control isn’t one of them. Government-imposed rent control is not the savior for low-income individuals and families.
Rent control can be a real market buzzkill. Imagine a party where the DJ can't crank up the music when the crowd wants to dance. That's rent control for the housing market. When dealing with a price ceiling, the economic equilibrium price rises, causing a shortage in supply. For the housing market, that means housing shortages. That’s the kind of party everyone wants to leave early.
They say the devil's in the details, but with rent control, the devil might be in the bathroom tiles. When landlords can't make a decent profit, they may put off repairs and improvements, and many studies (specific studies referenced later on) confirm that rent control can indeed lead to a decline in housing quality. Some repairs when left undone lead to dangerous housing environments, and create a lower standard of living for people. We're not just talking about leaky faucets and peeling paint here, but fire hazards, shaky foundations, gas or chemical leaks, or worse.
Picture this: You have a lemonade stand, but the city says you can only sell lemonade at 25 cents a cup. It doesn’t matter how good the lemonade is. It doesn’t matter how much the customer is willing to pay. It doesn’t matter how much the lemonade costs you to make. Are you motivated to keep your stand shiny and your lemons fresh? Probably not. That's how rent control can affect landlords.
Another economic disincentive that rent control inhibits is new real estate development projects. If rent control is set in a way that doesn’t allow real estate investors to receive a healthy enough return, then they will look elsewhere for their investments to go, creating a shortage in housing. Housing shortages are dangerous because development projects take several months or years to complete. It is hard to play catch up.
Those who disagree with me may claim that rent control policies are crucial for fostering affordable housing and preventing displacement. In a world with rapidly rising living costs, these measures help protect vulnerable populations, such as low-income families and seniors, from eviction due to unaffordable rent hikes. By stabilizing rental prices, rent control can create more stable and inclusive communities, encouraging economic diversity and preserving the social fabric of neighborhoods. It's a vital tool in the fight against housing inequality and ensures that everyone has a chance to access safe and stable housing.
While I think these intentions are sincere, I don’t think that the policies in question truly have these effects. I think the evidence shows that.
How has this been seen in American cities? Let’s look at New York City for starters.
New York City's rent control laws, although aimed at ensuring housing affordability, have experienced the negative impacts listed above. According to a study by the Furman Center, rent-regulated units experienced a 21% lower likelihood of building maintenance improvements compared to market-rate units, leading to subpar living conditions. Additionally, a report by the Citizens Budget Commission highlighted that these laws reduced rental property investment by 24%, hindering the growth of the city's housing supply. Consequently, New York's rental market has seen a widening gap between controlled and unregulated rents, exacerbating the affordability crisis. Reforms should be considered to address these issues effectively. The American Enterprise Institute conducted research using the NY census, and published the following findings:
“The Census report found that rent-regulated units have twice as many leaks, three times as many heating breakdowns, and three times as much mold. A third of them have “rodents” (almost twice the rate of unregulated apartments). Some 176,000 regulated units had three or more maintenance issues.”
Rent control might sound like the ultimate housing superhero, but beneath the cape, it has some dirty laundry. The negative effects of these policies are real and can be life changing. Instead of depending solely on rent control policies, governments should embrace a more diverse approach. Let’s utilize economic incentives for developers, reasonable tenant protections, and well-targeted subsidies. After all, we all would like to see more affordable housing, we just need to get there the right way. Rent control laws are not the right way.