This post is an update to a post on rent control I wrote in 2022. it was inspired by a Zoom conversation I had some weeks ago. We were talking about rent control and I mentioned there was plenty of research showing that rent control often does more harm than good. My comment triggered a quick response, “yeah, that’s what conservatives say”. (For the record, I’m not a conservative).
I’ll start with an extended excerpt from the original post, The Politics and Policy of Rent Control:
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:
[Question] Won’t developers stop building new housing if there is rent control? [Answer] The claim that rent control reduces the quality and quantity of available housing is a myth perpetuated by the real estate lobby. …
[I decided to do some research, and] 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?
Here’s the update (excerpts from more recent articles and papers):
“A law of 2023 allowed regional governments to impose rent controls where housing is scarce. In Catalonia, the only region to apply them fully, the main effect was to shrink the number of new rental contracts by almost a fifth as landlords pulled out.”. The Economist, January 16, 2025
“In this study, I examine a wide range of empirical studies on rent control published…between 1967 and 2023 [112 studies in all]. I conclude that, although rent control appears to be very effective in achieving lower rents for families in controlled units, its primary goal, it also results in a number of undesired effects, including, among others, higher rents for uncontrolled units, lower mobility and reduced residential construction. These unintended effects counteract the desired effect, thus, diminishing the net benefit of rent control.” Kholodilin, Konstantin A. (2024) "Rent control effects through the lens of empirical research: An almost complete review of the literature”
“In rent-controlled Stockholm in 2022, the average wait time for an apartment was nine years. Scotland capped rent increases for existing tenants at 3 percent per year in 2023, and average rent went up by 6 percent because landlords compensated by raising rents more for new tenants. In Berlin, a 2020 rent-control scheme was struck down in court in 2021 after it worsened the city’s housing shortage. Ninety-six percent of properties in the Netherlands are rent-controlled, and prices are soaring as supply evaporates. Rent controls in Ireland have brought housing investment to a standstill. Meanwhile, in Argentina, President Javier Milei repealed rent controls last year. Since then, the supply of rentals in Buenos Aires is up 170 percent and the average rent is down 40 percent in real terms. Follow the evidence.” Nation Review Newsletter, September 27, 2024
“In Boston [the mayor] proposed an annual cap on increases of CPI plus 6%—a level few landlords would try to exceed. But the problem is that once politicians have control over rental prices, they are tempted to keep bearing down on them, which gums up the market. Price controls can act like a ratchet: easy to tighten but very hard to relax.
Rent controls are most damaging when supply is constrained and demand is high, squeezing those searching for somewhere to live… American lefties talk dreamily of Vienna, where 80% of the city’s inhabitants live in rent-controlled apartment blocks. Last year the New York Times even dubbed it a “Renters’ Utopia”. But that city’s planning laws have long made it easy to keep adding apartment blocks and, in any case, its population has barely increased since the second world war. Seeing Vienna-style rent controls as the answer to problems in Manhattan misses the point.
One city provides a good model for helping renters, however. In 2016 Auckland in New Zealand…passed a law allowing more dense development on three-quarters of residential land ..A housing boom followed—adding 44,000 homes in seven years, equivalent to around 8% of current stock. A new study by Ryan Greenaway-McGrevy of the University of Auckland estimates that the extra homes have held rents almost 30% below where they otherwise would have been.” The Economist, May 29, 2024