The inspiration for this post came from reading the following comment on the October 15th New York Times article, The Rent Revolution Is Coming:
Seattle is struggling with the cost of housing, and renter activism has seized the imagination of the city leaders, who have passed law after law limiting the rights of landlords and centering the needs of renters. Landlords were forced to accept the first tenant in line who met the landlord’s published criteria, and, as a result, to protect their property, landlords raised income thresholds and requirements became rigid an unattainable by all but the well-paid with resources and perfect references.
Impediments to eviction have put landlords at risk of squatters, whose rights are protected over the land owners’. As a result in one year the city saw the sale of 3000 rental properties which equaled 10,000 rental units. Sold properties were taken off the rental market to become private residences with no rental, or they were torn down and developed into high income rental, or they were purchased by hedge funds and REITs which ironically fund the pensions of many teacher unions.
Demonizing the landlords as a class does not work any more than valorizing the moral character and infinitely superior rights of tenants. Tenants, with no equity at risk, can do massive damage to apartments and homes. Left out of the New York Times discussion is the risk that landlords take and as other commenters have noted, anything about what the pandemic did to their reserves as their mortgages remain due, property values and taxes went up, and the rent was excused.
Which piqued my curiosity about how Seattle’s political class is presenting rent control to the masses. This is what I found under “Rent Control FAQs” on the Seattle City Council’s website:
Won’t developers stop building new housing if there is rent control?
The claim that rent control reduces the quality and quantity of available housing is a myth perpetuated by the real estate lobby. As long as Seattle is growing as a metropolitan region and remains a job creation center, developers will have an incentive to build in Seattle because they can make profits. Rent control will be no more responsible for developers halting building than will a higher minimum wage cause job losses. New York City's "two largest building booms took place during times of strict rent controls: the 1920s and the post-war period between 1947 and 1965." More recently, UC Berkeley researchers have found that “the six cities that had rent control in the Bay Area actually produced more housing units per capita than cities without rent control.” Which means, not that rent control caused more development, but that rent control did not prevent new construction.
As a Bay Area resident, I know that until recently local rent control was limited to old residential buildings and did not apply to new construction. Under those conditions, why would there be any causal connection between rent control and housing construction? Besides, its quite possible the Bay Area cities that implemented rent control did so because they had housing shortages, which had driven up rents, and the shortage of housing led to both new housing construction and political pressure to implement rent control. In other words, the lack of affordable housing in the Bay Area created conditions conducive to both rent control and housing construction.
Note too that the FAQ answer left out the first part of the sentence it quoted about the six Bay Area cities. Here’s the full sentence: "When we looked at housing production numbers from 2007 to 2013, the six cities that had rent control in the Bay Area actually produced more housing units per capita than cities without rent control.” (Miriam Zuk/Othering and Belonging Institute, 2015). Thing is, at that time there had been no binding rent control ordinances passed in the Bay Area since 1985 (Mitchell Crispell/Urban Displacement Project/University of California, Berkeley, 2016) and none applied to housing built in the 21st century. So of course rent control in these six cities didn’t prevent new construction. As for rent control in New York City, let’s just say the situation was murkier than the Seattle City Council would have had us believe. For instance, in New York City during the 1950s, “a severe housing shortage prompted the first deregulation of rental units.” (Wikipedia).
Bottom line: the problem with broad statements about rent control is that rent control laws vary greatly and so their effects are likely to vary greatly. Details matter.
That said, here is what I found on the first page of Google Scholar search results on rent control (accessed 10/18/22), limited to articles from 2000 to present, rent control in US only. All search results are below (i.e., no cherry-picking):
Basu, K. and Emerson, P.M. (2000), The Economics of Tenancy Rent Control. The Economic Journal, 110: 939-962. https://doi.org/10.1111/1468-0297.00571
Selected quote: “Abolition of the rent control regime [can] result in across-the-board lowering of rents.”
Blair Jenkins, 2009. "Rent Control: Do Economists Agree?," Econ Journal Watch, Econ Journal Watch, vol. 6(1), pages 73-112, January.
Selected quote: “My findings cover research on many dimensions of the issue, including housing availability, maintenance and housing quality, rental rates, political and administrative costs, and redistribution. It is fair to say that the literature points to a conclusion against rent control…”
Sims, D. P. (2007). "Out of control: What can we learn from the end of Massachusetts rent control?" Journal of Urban Economics 61(1): 129-151. https://doi.org/10.1016/j.jue.2006.06.004
Selected quote: “My results suggest rent control had little effect on the construction of new housing but did encourage owners to shift units away from rental status and reduced rents substantially.”
Millsap, Adam, The Economics of Rent Control (November 16, 2018). https://ssrn.com/abstract=3272490 or http://dx.doi.org/10.2139/ssrn.3272490
Selected quote: “…the bulk of the evidence shows that [rent control is] an inefficient policy with several negative side effects. Rent control decreases the amount of rental housing, raises prices in the uncontrolled sector, reduces the quality of rental units, leads to a misallocation of units, and decreases tenant mobility.”
Arnott, R. and M. Igarashi (2000). "Rent control, mismatch costs and search efficiency." Regional Science and Urban Economics 30(3): 249-288. https://doi.org/10.1016/S0166-0462(00)00033-8
Selected quote: “This paper applies a monopolistically competitive model of the rental housing market developed by Igarashi to explore [the effects of rent control]. In the model, mild rent controls are welfare-improving but severe controls are harmful.” [Note: monopolistic competition is a market structure where a large number of firms compete for market share and each firm’s product is similar to—though not interchangeable with—the other firms’ products.]
Glaeser, Edward, L., and Erzo F. P. Luttmer. 2003. "The Misallocation of Housing Under Rent Control." American Economic Review, 93 (4): 1027-1046.
Selected quote: “[Our] methodology compares consumption patterns for demographic subgroups in rent-controlled and free-market places. We find that in New York City, which is rent-controlled, an economically and statistically significant fraction of apartments appears to be misallocated across demographic subgroups.” {i.e., too many of the better-off folks live in rent-controlled units.]
Autor, David H., Christopher J. Palmer, and Parag A. Pathak. 2019. "Ending Rent Control Reduced Crime in Cambridge." AEA Papers and Proceedings, 109: 381-84. DOI: 10.1257/pandp.20191022
Selected quote: “Using detailed location-specific criminal incident-level data, we find that sudden rent decontrol in Cambridge, Massachusetts in 1995 caused overall crime to fall by 16 percent—approximately 1,200 crimes annually.”
Maybe all these academics are employed by the real estate lobby?