Rent control is a tactic utilized to help mitigate the effects of gentrification. States like New York, California, and Oregon have recently passed legislation imposing changes in rent control mitigation strategies. This type of policy is attractive to law-makers, because it resonates with certain voter bases, but it doesn’t always have the anticipated effects.
Rent Control: Good or Bad?
Rent control is a controversial policy, with vehement supporters and opposers.
Here are some important effects of rent control that are essential to understanding the problem holistically:
Turnover
Units under rental control are usually occupied because tenants will hold onto property for decades. This leads to a stagnant market, reliant on new tenants. But these new residents can struggle to find properties between little turnover and low stock. This perpetuates the cycle and further depresses the local real estate market.
Improper Allocation of Resources
In places where the market is not rent-controlled, units are usually only inhabited by those who need to live there. Housing is expensive, so three bedroom apartments usually house three people. But when homes are rent-controlled, people choose to inhabit units that are larger – that they typically could not afford. A single person typically does not need three bedroom apartments, and when rent-controlled units are not properly managed, they can result in an improper allocation of resources.
Inadequate Management
In controlled units, supply and demand ensure that the units are high-quality and managed properly (or are priced accordingly). If an apartment is too expensive or is in improper condition, no one will move there. Incentivizing landlords and developers have to move towards market standards. But when apartments are rent-controlled, they are more likely to be mismanaged. Much of this is due to the fact that though rent-controlled apartments account for inflation, they don’t accommodate for the changing costs of land, labor, maintenance, and taxes.
When an apartment is damaged in a rent-controlled unit and the landlord cannot afford to repair it, there’s nothing that can be done. Tenants then have to endure difficult and often unsafe situations. While this is more infrequent, it is one of the risks of rent-controlled housing.
Violates Property Rights
Perhaps the most popular criticism of rent control, government control of rent prices violates the property rights guaranteed to Americans. When state governments arbitrarily decide how much a landlord can charge to rent their housing, those who make their living as landlords have their income jeopardized. Landlords should be allowed to price their housing to make the best return on their investment.
Housing is a right that people are guaranteed and the housing crisis is an extremely important issue that should be prioritized in policy. But landlords and their livelihoods should be accounted for in these decisions, especially those regarding rent control.
Rent control does have some benefits. They are usually discussed more frequently in conversations about the pros and cons of rent control policies. It guarantees that those at risk are not evicted and pushed into homelessness. Rent control also helps battle gentrification, and keeps large companies that manage real estate from pushing out vulnerable tenants in favor of wealthier clients. With discussions of rent control, like all good debates, it’s important to look at various perspectives and understand why some people view rent control as either good or bad.
