This article was posted on Friday, Dec 01, 2023
Apartment Building

The below article was written by John Triplett of the Rental Housing Journal.  The is an interactive community of multifamily investors, independent rental home owners, residential property management professionals and other rental housing and real estate professionals. 

Rent control laws are contributing to a shortage of affordable housing, according to economists.

When rent caps are imposed, developers build fewer new rental units, the supply of available housing declines and housing costs increase. Instead of rent control, policymakers should focus on supply-side solutions: reforming their local zoning code and providing tax incentives for developers to bring new units online, economists say.

Ryan Bourne, chair for the public understanding of economics at the Cato Institute’s Center for Economic Studies, said economists overwhelmingly agree that imposing rent control tends to reduce the amount and quality of affordable housing and explained why in an interview with FOX Business.

“Capping rents at a time when you know demand for property is growing strongly creates a situation where you have a shortage of rental accommodation relative to demand, so it creates shortages,” Bourne said. “And to the extent they create shortages, that can actually raise the underlying market rents because if you keep rents below market rates, a lot of landlords will decide to convert their properties to condos or sell them for owner occupation.”

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“So quite often,” he added, “it makes the kind of underlying market rate of property actually more expensive, rather than less expensive.”

Despite warnings from economists, rent control is becoming more and more popular.

Oregon led the charge in 2019 when the state imposed a cap on older units, and California followed suit in 2020. Since then, municipalities in Illinois, Colorado, Massachusetts and elsewhere are considering similar moves.

[Jeff’s Note: Dear Reader:

Although there are many reasons why rent caps are bad for both housing providers and housing consumers, the key message to deliver to our local and state politicians today is that rent caps and freezes drive the price of rents higher. We need to beat this drum together in unison until renters and local representatives wake up and realize that flawed housing policy (rent control) is the reason why rents are too high, not because housing providers are greedy pigs.

It is crucial for them to understand that rent control not only escalates rent prices but also diminishes the availability of rental units. Many property owners are choosing to convert their properties into condos, thereby removing them from the rental market. As cited in the AOA article “Has Rent Control Caused Homelessness?” by Michael Millman, Los Angeles has seen a reduction of one million rent-controlled units since the implementation of rent control.

We encourage you to take action by tearing out or printing out this article, highlighting Ryan Bourne’s comment, and mailing it to your councilmember. Send physical copies and emails to your mayor and all council members in your city. Additionally, participate in written online public comments and attend city council meetings when discussions regarding rent caps arise.

In the past week, I had the privilege of meeting several AOA members who attended a city council meeting for the first time. Witnessing new faces advocating for property rights was truly heartening. While AOA represents all housing providers, a strong turnout can significantly impact the outcome of these discussions.

Help AOA Stop the “Justice for Renters Act”

Help AOA in its efforts to oppose the “Justice for Renters Act,” which aims to repeal California’s anti-rent control legislation that prevented municipalities from setting or determining rents when a unit became available or vacant (vacancy decontrol). Your support is vital in spreading awareness about the potential adverse effects of this act on renters. You can make a difference by either sending a check or setting up a recurring donation by visiting the AOA Political Action page at AOAUSA.COM/PAC.

Happy Holidays!

Finally, AOA would like to extend our warm wishes for a joyful Hanukkah and a Merry Christmas! Stay in or join the upper 1% of the population by taking a moment to outline your goals for 2024. May the upcoming year bring you success in all aspects of your life!]