No question, there’s a housing shortage across the U.S., and housing prices are soaring. To combat this, several states and municipalities have proposed rent control measures to make housing more affordable. But as we’ve seen, rent control doesn’t work the way it’s supposed to.
Some of the common sense arguments against rent control include the following economic and social factors:
- Reduces the quantity of existing available housing—People are less likely to move if rents are controlled, which also results in even fewer opportunities for new tenants to secure housing.
- Subsidizes residents who don’t need it—A recent study by the National Apartment Association showed that nearly 60% of housing providers are directly aware of higher-income tenants who benefit from rent control. This counters the misunderstanding held by half of Americans that rent control is meant to primarily provide housing assistance to moderate- to lower-income families.
- Reduces the quality of available housing—With a limit set on rental income and increasing operating costs, margins shrink for building owners. This forces them to absorb the expense of essential maintenance and makes it more challenging to invest in property improvements. NAA’s research shows that “67% of housing providers have deferred or expect to defer nonessential maintenance and improvements due to rent control.”
- Limits new construction—In areas with rent control, there’s less incentive for property development. The developers surveyed in the NAA’s research said they avoid investment in locations where rent control is in place. Many developers prefer to build in areas where they can respond to local economic factors and control their own rents. And when the cost to build is already so high and the new construction process so complex, it becomes less attractive for builders to construct new housing for moderate- or low-income families where rent is controlled.
At IREM, we recognize the importance of housing choice and access to quality housing that is affordable. We’ve seen how rent control undermines both of these things, making it financially challenging for property owners and real estate managers to meet the needs of their tenants.
Rent control proposals at the state level
There’s been a significant increase in rent control proposals across the country. In 2022, several states introduced rent control measures and we expect that even more states will introduce similar legislation in 2023, including the following:
Colorado: Rent control legislation is regularly introduced in Colorado. To date, such efforts have stalled. Another push is possible in 2023.
Florida: Lawmakers in St. Petersburg and Tampa considered measures to place rent control before voters on the 2022 ballot, but those efforts stalled. In Orange County, which includes Orlando, a ballot measure implementing rent control passed, but a state judge blocked election officials from certifying the results. In 2023, it’s possible that these and other cities and counties will again pursue workarounds to rent control preemption.
Maryland: Efforts to impose rent control in Montgomery County are expected to continue. The Washington, D.C. suburb is home to more than 1 million residents.
Massachusetts: The Boston City Council recently voted to advance Mayor Michelle Wu’s rent control proposal to the state legislature. The proposal would cap Boston rent increases at 6% plus the change to the Consumer Price Index, to no greater than 10%.
Nevada: In Nevada, the powerful Culinary Workers Union (CWU) backs rent control supporters statewide. And while CWU-backed elected officials will push hard for statewide legislation, rent control proponents were dealt a blow to their efforts after the sitting governor, Steve Sisolak, a supporter of implementing rent control measures, lost his election to Republican Joe Lombardo. Still, we expect a strong push in the state legislature, which only convenes in odd-numbered years, like 2023.
Rent control proposal at the federal level
Unfortunately, rent control proposals are now also being considered at the federal level. In January, the White House issued a “Blueprint for a Renters Bill of Rights,” which lists a set of actions the administration believes would strengthen tenant protections and encourage rental affordability. These include the Federal Housing Finance Agency examination of proposed actions involving renter protections and limiting egregious rent increases.
The administration is also launching a Resident-Centered Housing Challenge, a call to action to housing providers and other stakeholders to strengthen practices and make independent commitments to improve the quality of life for renters.
IREM responded to this call to action by collaborating with the National Association of REALTORS (NAR) to create resources that highlight ways for property management companies to incorporate resident-centered practices in their businesses. Practices would include a range of examples that have proven effective, such as advertising to prospective residents that Housing Choice Vouchers are accepted at their property, providing information about rental assistance and using alternative credit scores for applicants without a detailed credit history.
IREM, along with our real estate coalition, issued a statement on how the proposal would create duplicative and onerous federal regulations that would interfere with state and local laws meant to govern the housing provider and resident relationship.
Renee M. Savage is 2023 president of IREM. She also serves as president of SavageCRE Inc, a consulting company supporting the commercial and multifamily real estate sectors. She has more than 34 years of experience in property and asset management and corporate operations.