America’s affordable housing crisis has state and local advocates turning to rent control as a possible solution. Efforts are underway in California to repeal its prohibition against rent control, and there are existing or potential legislative efforts in 10 other states to remove prohibitions against rent control.
We understand the appeal of rent control. Local and state lawmakers, driven by the urging of constituents, campaign promises, and short terms of office, are looking for expedient policy solutions to help them address housing affordability issues in their communities.
What these well-meaning politicians and citizens don’t realize is that rent control is not a cost-free policy, and it’s certainly not a panacea. Lawmakers would have more success if they fully understood the specific problems facing their communities and then were to apply policy levers that respond to those challenges.
There has been much discussion on the topic, but little in terms of substance, despite decades of existing examples of rent control-related policy failures. The National Multifamily Housing Council’s (NMHC) Research Foundation recently released a new literature review of research conducted using those examples, “The Impacts of Rent Control: A Research Review and Synthesis,” authored by Dr. Lisa Sturtevant.
The report reviews the academic research on rent control from 1972 to 2017 and includes case studies of programs in New York; Boston; Los Angeles; San Francisco; Santa Monica, Calif.; and Washington, D.C. The comprehensive review found that, while imposing limits on rents might seem to be a logical way to keep housing costs low, there are actually significant problems associated with rent control programs. What’s more, economists nearly universally agree that rent ceilings reduce the quantity and quality of housing.
The review led to a number of key findings:
• First, rent control laws lead to a reduction in available supply of rental housing in a community, particularly through the conversion of rental buildings to ownership.
• Rent control policies generally lead to higher rents in the uncontrolled market, with rents sometimes substantially higher than would be expected without rent control.
• Rent control policies do a poor job at targeting benefits. While some low-income families do benefit from rent control, so, too, do higher-income households. There are more efficient and effective ways to provide assistance to lower-income individuals and families who need affordable housing than rent control.
• Residents of rent-controlled units move less often than do residents of uncontrolled housing units, which can mean that rent control causes renters to continue to live in units that are too small, too large, or not in the right location to best meet their housing needs.
• There are significant fiscal costs associated with implementing a rent control program.
Ultimately, rent control can be boiled down to a simple truth: It does nothing to promote the production of rental housing. And when there’s strong demand and no mechanism for increasing supply, it raises housing costs and hurts affordability overall.
That’s not to say that communities across the nation are not facing very real housing affordability challenges—they are. Analysis conducted by NMHC and the National Apartment Association shows that housing demand is on the rise and that the U.S. will need to build an additional 4.6 million new apartment homes by the end of 2030. This means we will need to add at least 328,000 new apartment homes each year on average to keep up with demand. However, the average number of completions from 2011 to 2016 was just 225,000.
If lawmakers are serious about fighting for more housing in their communities, then they need to consider new and creative solutions to the challenges they face. Public and private stakeholders have a responsibility to come together to find ways to both build more housing and reduce housing costs. Policy solutions should be unique to communities and the precise drivers of housing affordability challenges. An approach that is effective in California is not likely to have the same impact in Texas.
There is no single policy remedy that will ease housing affordability across the U.S.; we will need a comprehensive and nimble approach. However, decades of research, case studies, and on-the-ground experiences have proved that rent control—far from improving housing affordability—deepens the problem and results, at best, with only kicking the can further down the road.