Damaging Housing Options Lindsay Bliss • Rent Control's Strangle Hold on Housing Quality Winter 2004

In late 2004, the Boston City Council voted down the second rent control resolution proposed in as many years. The refusal to return to government pricing interventions should be considered a victory for low-income renters and Boston’s many students, for whom rent control means costlier, poorer quality housing.

Rent control was designed to keep housing prices down in order to provide affordable housing for lowerincome renters and to create integrated urban neighborhoods. In market-priced housing, there is a natural equilibrium between the prices landlords want to charge and those individuals are willing to pay for an apartment. In rent-controlled areas, however, artificially low prices mean that more individuals must compete for the same number of lowcost apartments.

Most proponents of rent control laws suggest that keeping prices down allows for affordable housing in otherwise expensive neighborhoods, increasing the economic diversity of urban areas. In practice, rent control leads to the opposite, creating an incentive to stay in a rent-controlled apartment indefinitely and pass that apartment along to a family member or friend if one must leave. This process preserves the composition of neighborhoods for decades at a time. Hardest hit are people relocating to the area or those who would like to move into better housing. The lack of turnover among renters shuts out these typically more diverse groups.

Rent control also produces the ‘widow effect,’ leaving one woman with an apartment built for a family. In a free housing market, the widow would likely move into a smaller, more affordable apartment, accommodating the housing needs of another growing family in the process. With rent prices locked, that incentive no longer exists; staying put may actually be less expensive. This results in wasted housing space and an artificially decreased vacancy rate.

The government generally acknowledges that as a practical matter, rent control cannot cover all housing, and it responds to consumer demand by leaving some residential space uncontrolled. This creates a ‘shadow market’ where fewer apartments are available, giving the landlords the upper hand in setting rents. All those not lucky enough to live under rent control suffer artificially increased prices as a result.

To solve this problem, cities have extended rent control policies to cover buildings beyond those initially included. Renters in newer buildings see the immediate personal advantages of rent control— stabilized rents for current residents—and lobby for rent control without understanding the damage it does to the housing market. This happens so often that the New York City government has deemed the process “recapturing” buildings.

Property owners will only construct new facilities if there is a financial incentive to do so. “Recapturing” threatens that incentive by eliminating most or all of the profit in renting out property, thus decreasing new constructions and inducing lower vacancy rates. At the same time, landlords who retain uncontrolled facilities gain a disproportionate share of market power over their tenants.

Proponents of rent control began with the best of intentions: preventing tenant exploitation and integrating urban socioeconomic classes. In practice, such laws have instead damaged housing markets in urban centers, prevented integration, and caused increased financial exploitation. For the lucky few who reside in rent-controlled apartments, the policy takes away any incentive to leave, producing artificially high rents for newcomers and the upwardly mobile, with little hope for improvement. These policies damage all renters, not just those living outside rent-controlled facilities.

Lindsay Bliss is a junior in Timothy Dwight College.