While economists may quibble about the effects of minimum-wage hikes, there’s no such debate about rent control’s adverse effects.
Fifteen years ago, economist Paul Krugman called rent control one of the best-understood and least controversial economic issues. A 1992 poll of the American Economic Association found that 93 percent of its members agreed that “a ceiling on rents reduces the quality and quantity of housing.
A 2012 survey of leading academic economists reached the same conclusion. If the topic were climate change, scientific consensus would be invoked to end the debate.
Theory finds empirical confirmation in cities like Los Angeles, New York City and San Francisco that have embraced rent control. Housing quality declines as landlords lack the income or incentive to maintain properties. The rental pool shrinks as properties are left vacant, abandoned or sold. In San Francisco, for example, roughly one in 12 housing units is off the market. The housing stock is not replenished because developers decline to put their money in rent-controlled markets. Those fortunate enough to land a below-market rental tend to stay put to save money, reducing turnover and further blocking opportunities for would-be tenants.
Adam Davidson, in a 2013 article in The New York Times Magazine, calls that incentive to remain in place “a key factor in New York’s housing shortage.” There are a few lucky winners, for a time, but there’s no doubt that rent control reduces the quality and availability of rental housing. And there’s no guarantee the rent-controlled units will be occupied by low-income tenants.
Yet, the idea gains political traction as rents rise, along with concerns about income inequality and gentrification. Renters are the majority of the population in nine of the nation’s 11 largest cities, according to the Wall Street Journal. That’s also true in Seattle. The city recently became one of the 10 most expensive cities for renters, according to the U.S. Census Bureau, posting the steepest rent increase in the nation between 2010 and 2013.
Naturally, then, the city’s populist progressives think there ought to be a law. Seattle City Council members Nick Licata and Kshama Sawant seem to favor rent control. Sawant would be one of the lonely economists dissenting from the rent-control consensus. There’s a big hurdle, though – Washington is one of more than 30 states with laws pre-empting local rent control ordinances. For Seattle to impose rent control, state law would have to be changed, either by initiative or legislative action.
The state laws protect property rights. There’s also a good argument that, by forcing property owners to accept below-market rents, rent controls violate the takings clause of the Fifth Amendment to the U.S. Constitution. A few years ago, it looked like the U.S. Supreme Court would hear what many legal scholars saw as a strong case brought by James Harmon, a landlord challenging New York City’s rent control law. Ultimately, however, the court declined the invitation.
It’s easy – and appropriate – to point out the inequities rent controls produce. Renters of rent controlled apartments in New York City have included U.S. Rep. Charles Rangel, D-N.Y., New York Mayor Ed Koch and actress Faye Dunaway. One of Harmon’s tenants at the time of his suit was an executive who, according to The Wall Street Journal, “own[ed] a second home near the shore in South Hampton, where she spends weekends gardening and playing tennis.
Such aberrations are not unusual in the perverse lottery that awards a lucky few, permanent residents at ridiculously low rents. Most residents of New York’s rent-stabilized apartments are far from poor. Bay area columnist Scott James, writing in 2012, reported that in 2000, one-fourth of households in rent-controlled apartments in San Francisco earned more than $100,000.00.
Rent control is not just wrong in principle; it’s a violation of fundamental property rights. It also fails to deliver.
Mayor Ed Murray’s housing affordability committee will be issuing its recommendations. Ideally, they’ll offer reasonable strategies for expanding housing opportunities. If so, rent control would not be among them.
Imposing controls that would reduce the quality and quantity of affordable housing in the city would compound, not solve, the problem. Believing the impossible does not make it so.
Richard S. Davis’ column appears occasionally on the Opinion pages of the Seattle Times. Reprinted with permission of the author. [email protected]
Reprinted with permission of the Small Property Owners of San Francisco Institute (SPOSFI) News. For more information on becoming a member of SPOSFI or to send a tax-deductible donation, please visit their website at www.smallprop.org or call (415) 647-2419.