Rent control was included on Forbes’ list of “Dumbest Ideas of the Century” back in 1999.
“The purpose of these policies is to try and ensure that a city has a certain amount of affordable housing options for lower and middle-class renters.” –Forbes
“In many cases, rent control appears to be the most efficient technique presently known to destroy a city — except for bombing.” – Assar Lindbeck
I can see it now. A well-meaning family enjoys a hardy meal around a rickety drop-leaf table. Contentedness fills the room in that movie-like, picturesque sort of way. Then, it happens. Before you know it, the table quakes with roaring shouts as food and insults sling through the air.
You, my friend, have witnessed one of two scenes: my family’s 2017 Thanksgiving dinner… or the aftermath of someone’s decision to bring up rent control.
Everyone has their panties in a knot over this hot topic. In one corner of the ring, you have the rent control supporters who preach and praise attainable housing for all. Meanwhile, the anti-rent control folk mutter “supply and demand” and “price ceilings” under their breath while throwing practice punches. To make things even more spicy, rent control discussions/tantrums generally carry some charming political undertones. If you find yourself dopily munching popcorn outside the ring while knowing next to nothing about the fight, this article is for you.
I’m not here to tell you who will/should win this thing. This does not, however, give you an excuse to be that guy who picks a side without ever doing his homework. Bandwagon arguers also suck. So please, read this thing, learn about the main arguments each side is using, think a lil’, and pull together a respectable opinion of your own. Consider this to be an opinion-free collection of arguments solidly presented just for you. You’re welcome.
No shame in your game if you’re not quite sure what rent control is. At a basic level, rent control is a government program that sets a limit on leasing prices. 37 states have laws that forbid these types of controls. California serves as a poster child for rent control at the moment. At the end of 2019, Cali signed the California’s Tenant Protection Act of 2019 that’s best known for two main points: it limits rent increases to 5% each year plus inflation until January 1, 2030 and prevents landlords from booting out residents for no reason. For the sake of clarification, this article is talking about rent stabilization efforts rather than flat rent control price caps.
Rent Control, Please
Here are some (not all) of the arguments pro-rent control clans are using.
Rent is soaring higher than a freaking kite… in some places
This first thing you’re going to hear most rent control supporters spit out is the devastating effect of skyrocketing rents. Take a gander at California. Sacramento and San Jose hiked up rent by over 50% from 2010-2019. Phoenix snags the bronze in worst rent increases. Californians disinterested in emptying their pockets often look to Phoenix as a safe haven.
This factor, mixed with the area’s flock of snow birds, essentially invites high rents in and encourages them to feel at home. The overall average U.S. rate increase, from 2008-2018, was 28%. Doesn’t that make you feel all warm and fuzzy?
Breakups suck. Unfortunately, leasing agents and landlords generally find Ben & Jerry’s and reruns of Dirty Dancing to be ineffective while picking up the pieces of their broken leases. Here’s where rent control comes in. Nothing encourages loyalty like a good price (I’m only encouraging gold digging in apartment shopping). When a resident knows they’re paying a low and stable price for their place, they’re gonna stay put. They may even better behave themselves in order to ensure they keep their spot.
Possible eviction protection
Remember when I said California’s law prevents landlords from kicking residents out on whim? Let’s look at that a little more. To specify, this portion of the law pertains to residents of 12+ months. Before residents get too excited, however, they need to acknowledge that landlords can still kick someone out for being an idiot. Section 1946.2 allows for evictions with just cause, which includes both at-fault and no-fault reasons. The logic behind at-fault evictions is pretty simple. If you choose to dump 1,000 lbs of dry ice in the pool or bust a hole in your ceiling, you can start packing your things now. No-fault evictions are a tad more detailed. These occur when the reason for eviction is outside of the renter’s control. Victims of these lovely surprises must be compensated under California’s law with either a free month of rent or a big ol’ check equal to a month’s rent. Just remember that this protection depends on the nature of an area’s specific rent control law.
Landlords can still play with market prices
Rent control is an entirely different game after a resident moves out. A good chunk of the time, a unit becomes deregulated once a resident bails. Some statues even give landlords permission to raise rent to their heart’s content for a recently-vacated unit. Put into practice, this means that landlords can charge market rates for new applicants. See? Now all the economics and finance geeks can be happy, kinda.
Hey Hey, Ho Ho, Rent Control Has Got to Go
Then there’s this camp: the one that’d like to send rent control where the sun don’t shine. Here’s what they have to say.
Kiss unchanging rent goodbye
Back in the day when gas was 25¢ a gallon and everyone walked uphill both ways, rent didn’t always increase with every passing year. If you think this sounds like an idea that you’d like to have stick around, I am politely inviting you to get over it. Opponents of rent control are hootin’ and hollerin’ about management’s inability to afford property upkeep given their revenue constraints under rent control. To understand this point, consider the following sappy anecdote: Karen Pearson. A delightful (I don’t actually know if that’s true, I’m just guessing) manager of a fourplex she co-owns with her husband. After not raising rent in three years, she felt the need, thanks to rent controls, to rapidly charge more out of trepidation for rent caps coming her way (I didn’t make that up, look for yourself). Likewise, you’ve got Meet Kevin, a popular youtube channel run by a 27-year-old real estate broker, that claims that landlords must raise the rent in order to keep up with the market value of the property.
If you’re interested, here’s his two cents on the whole topic.
So why was Karen, the fourplex lady we just talked about, so concerned about raking in the cash prior to the oncoming storm of rent control? Maintenance. Like most people, she was concerned about paying for general property upkeep expenses. In particular, she knew that her property was in need of a new roof. Without the revenue wiggle room of degredulated rent, Karen knew she would have no way of financing this expedition. Even goody two-shoes landlords, who in no way want to jip their residents, straight up cannot afford proper maintenance under rent control.
Those using rent control ≠ those who need rent control
Sometimes rent control ends up supplying the rich and giving the poor the short stick— just like Robin Hood always wanted, right? The visionary in you wants to believe that rent control does indeed help those in need, I know. But unfortunately, we live in reality… and reality is well known for sucking on occasion. Economists observe that rent control has created a two-tier housing market. Basically, this means that you’ve got two hunks of the market: the cheap, rent-controlled portion full of people who intend to stay right where they are and the uncontrolled portion over which everyone fights like table scraps. All this fighting, in turn, leads to higher prices. Then there’s the kicker: those who end up in this second camp are the very people in need of lower prices. Studies show that those in Manhattan, for example, who benefit the most from rent control are affluent individuals who snatched an apartment a while ago and simply held onto it. Meanwhile, there’s a fair share of people who use their rent-controlled apartment as a vacation home. This leaves those in need of proposed rent control benefits to fend in the wild, deregulated market.
Screw supply and demand
As an econ and finance geek wanna-be, this point is my personal fav. Plus, it’s pretty simple to wrap your head around. Those who despise rent control are quick to point out that creating a price ceiling of any sort shoves a fat wedge between supply and demand. What the heck is a price ceiling? Really, all it is is a constraint that sets a max selling point on an item. Without price ceilings, prices naturally settle right in where supply and demand equal each other. The introduction of a price ceiling, however, squashes prices below this equilibrium point. You’re then left with supply and demand levels that no longer work together. Demand now exceeds supply. I included another lovely video to help you out.
Well, that’s all I have to say about that.
Again, I would ask that you refrain from shooting the innocent, adorable Multifam messenger. I’m just out here telling you what’s what in this debate. You can kick it with the rent control groupies and their affordable housing ideals or flaunt your economic knowledge with the anti-rent-controlies. Either way, I don’t mind. Now that my job is finished, I will be the one enjoying my popcorn while you go at it. Or maybe twizzlers. I’m kinda feeling twizzlers right now.