Metropolis

Rent Control Is Back

For years, economists have argued that the protections harmed the tenants they were supposed to help. The evidence complicates the diagnosis.

Echo Park neighborhood in Los Angeles
Echo Park neighborhood in Los Angeles.
iStock/Getty Images Plus

There are few policies economists dislike as much as rent control. Most believe rent-regulation policies have a negative impact on the quality and quantity of affordable housing in cities where they exist. Economists’ papers on the subject largely back up the view that not only is rent regulation bad for the rental housing market at large—it’s bad for the very people it aims to help, discouraging tenants from moving and leaving them in poorly maintained housing.

Well, hug an economist, because the idea of government-regulated rent is making a comeback. There are more renters now than at any time in recent history, and they’re having a tough time of it. That has built national pressure for policies that help tenants get by. Last month, tiny Ossining, New York, became the first municipality in the state to approve rent stabilization in years. Politicians in New York City are toying with the idea of commercial rent control to protect small businesses. Next month, voters in California will decide whether to repeal a state law that restricts municipal power to set rents, setting the stage for new rent laws in cities up and down the coast.

Is this just going to make the state’s affordability problems worse? A couple of recent reports out of California, one from the University of Southern California and one from UC–Berkeley’s Haas Institute, make the case that rent regulation hasn’t gotten a fair shake from economists. It’s akin to the minimum wage debate, argues USC’s Manuel Pastor, in that Econ 101 theories don’t align with the evidence on the ground.

For example: By taking a portion of the housing stock off the market, rent regulation should drive up rents in unregulated apartments. The supply of market-rate apartments is lower; their prices should be higher. Indeed, there’s plenty of evidence that rent-stabilization policies encourage landlords to do whatever they can to remove their units from the program—often resulting in fewer rental units overall. But except in one example (more on this in a minute), that doesn’t seem to be raising rents.

A study from New Jersey showed that rents did not rise faster in places with rent stabilization, after controlling for other factors. A study of rents in New Jersey and California found that median rents were lower in cities with rent regulations. And a study of Boston-area rents, following the 1995 end of rent control in Massachusetts, showed that just having rent-stabilized units in the area decreased the rents of uncontrolled units.

That might be because rent-regulated buildings have maintenance issues, or even because rent-regulated areas have characteristics—low incomes, large minority populations—that make them less appealing to wealthy renters. For years, these were arguments that property owners and policymakers seeking to boost land values made against rent control. Stephen Barton, one of the authors of the Berkeley report and a former Berkeley city housing director, recalled hearing attendees at community meetings rail against rent control in the ’80s: “Next to bombing, rent control is the best way to destroy cities.”

Needless to say, disinvestment and abandonment no longer furnish the background to those conversations, and not everyone is so sure higher property values are what high-cost cities need. What economists call “negative spillovers” now look like barriers to gentrification. The same empirical studies tend to be cited as supportive evidence by both proponents and opponents of rent control.

In a nutshell, trade-offs like those—the preservation of lower-rent buildings, but with less upkeep—illustrate how difficult it is to put an apolitical value on rent regulations. The results are varied, imperfect, and complicated.

A characteristic example was the study that came out of San Francisco this year, where researchers from Stanford found that rent control had two significant effects. First, it increased the likelihood that tenants could stay in their apartments over a period of 18 years by 10 to 20 percent. Second, it caused landlords to embark on a frenzy of conversions to escape the regulations, reducing the rental stock and sending rents up by 5 percent citywide.

The researchers found that the rent-controlled tenants received a discount of $2.9 billion over that period. Oddly enough, the losses to all tenants (in the form of rising rents) were the same—$2.9 billion. And nearly half of that cost was borne by incoming renters. Landlords actions “likely fueled the gentrification of San Francisco,” the authors wrote. But also: Incumbent tenants benefited enormously.

Weighing those results, Pastor says, is where the disagreements emerge. A housing advocate’s “stability” is an economist’s misallocation of resources, as regulation entrenches mismatches between apartments and renters (big families in small apartments, small families in big apartments, people not living where they otherwise would). But stability is also a primary focus of housing policy, prompted by work, like Matthew Desmond’s Evicted, that shows the devastating effects of housing uncertainty.

The gist of it is that with something as fundamental as housing, up-or-down value judgments always incorporate controversial choices about what matters, and how much. Academic defenders of rent regulation, it should be noted, don’t believe the policy is a solution to the affordability crisis in California—that ultimately requires increasing the housing stock across the board—but one tool that can forestall the displacement of residents from their neighborhoods.

Ultimately, of course, few people care what evidence from Massachusetts, New Jersey, or San Francisco shows. At the city level, rent regulation has a big political advantage over other more empirically esteemed programs to help renters, such as housing vouchers and subsidies for low-income housing: It appears, to the average taxpayer voting this November, to be completely free. It’s not perfect, but at least it’s possible.