The Berlin Wall went down early in this decade but the regulatory wall of rent control is taking a little longer to dismantle.
But progress is being made.
State governments, for example, are lining up against rent control, the most recent being Illinois, where Gov. Jim Edgar just approved a new law prohibiting local governments from limiting in any way the amount of rent landlords can charge tenants.
Policy-makers from around the country have come to recognize that rent controls may serve a useful purpose during periods of severe housing shortages, but over time they lose their luster. While helping tenants in the short term, strict controls often discourage apartment construction and cause deferred maintenance of property.
Two recent studies came to that conclusion. “A Reevaluation of Residential Rent Controls” by Anthony Downs examines the social and economic effects of various rent control provisions, ranging from rigid controls to controlled but gradual rent increases. In the final analysis, Downs said that rent controls don’t work.
The National Multifamily Housing Council published “The High Cost of Rent Control,” which looks at the economic impact on owners, arguing that controls end up hurting the very people they are intended to help: the tenants.
Policy-makers have come to believe this sort of industry research and analysis.
Illinois’ Rent Control Preemption Act, now in effect, makes it illegal for local government to enact, maintain or enforce ordinances or resolutions that control how much rent is charged for commercial or residential property.
The National Multi-Housing Council and the National Apartment Association, both industry trade groups, lobbied heavily for the bill as they have in other states.
Currently 33 states have similar laws preempting local rent controls.
After spending a year studying problems that hinder Washington, D.C., businesses, a city-appointed panel has recommended dropping rent control.
Shawn Pharr, spokesman for a trade group representing 500 building owners, said that removing rent control would boost the city’s commercial business base and enable commercial and residential landlords to renovate their buildings, most of which are more than 40 years old.
The D.C. Rental Housing Act, enacted in 1985, limits rent increases to the rise in the cost of living. The law saved $100 a month each in 1996 for nearly two-thirds of the 100,000 tenants living in apartments in the city, an Urban Institute study found.
But de-regulation isn’t so easy in communities where rent controls have a history and tenants have become accustomed to it. For example, 14 California communities have controls on apartments. Two years ago, the state legislature forced cities to permit landlords to raise their rents to whatever the market will bear when apartment units are vacated, but the law didn’t go as far as other states’ and ban rent regulations entirely.
When rent control has been in place an extended period of time, politicians are reluctant to wipe out a system that many people have come to depend on. In California for example, Santa Monica, Berkeley and San Francisco have had rent control laws for nearly 20 years and more than 250,000 tenants live under their protections.
New York City has an even more serious problem.
Originally designed to protect renters from gouging during the postwar housing crunch in Manhattan, rent-controlled apartments have become as much a fixture of New York real estate as the Statue of Liberty. Currently more than 2 million of the city’s 16.2 million residents live in 1.2 million rent-regulated apartments in which rents are either frozen or only allowed to increase at a rate set by the city’s Rent Guidelines Board.
Landlords have fought the law since it was first enacted, but any real hope of throwing out the rules didn’t come until this year. The law was scheduled to expire this past June and several proposals were made to not extend the rules. Action was deferred until a compromise could be reached, but throughout the year the law has been hotly debated.
For some tenants, rent controls can mean the difference between having a home and being forced to move to more affordable areas or even living on the street. For many owners, rent controls take an economic sledgehammer to their bottom lines.
For now, landlords have made the more compelling case.
