Rent control: A do or don't?

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A friend recently asked me for my thoughts on rent control. For those of you who know me primarily for my thoughts on the war on sex, I spend my first two years in SF obsessed with housing policy.

Now, a confession. I’m a total weirdo in that I think we should implement policy based on what the evidence says about the likely results of that policy.

As Economist Blair Jenkins put it in her lit review of rent control’s real-world impacts, “The literature on the whole may be fairly said to show that rent control is bad.” If you don’t want to read an academic paper (who’s the weirdo now?) here’s a good anecdotal overview of the real-world impacts of rent control.

Yes, rent control does protect low-income tenants from eviction due to fast-rising rents. However, the research is extremely clear that rent control causes more problems than it solves for the average tenant. I don’t think it’s morally defensible to implement policies that create more suffering on net. Perhaps it could be defensible if the suffering were concentrated among the wealthy for the benefit of the poor. But rent control doesn’t meet that criterion either.

Rent control has four main downsides:

1. It raises average rents, exacerbating existing housing and homelessness crises.

2. It transfers wealth from the poorer to the wealthier.

3. It leads to dangerous and unpleasant living conditions for low-income tenants.

4. Rent control leads to labor inflexibility and long commutes for low-income families trapped in rent-controlled apartments, unable to afford to move closer to work.

“Economists from both the right and the left are in almost universal agreement that rent control makes housing problems worse in the long run,” writes Conor Dougherty, author of Golden Gates: Fighting for Housing in America.

How rent control raises average rents

SF Curbed writer Adam Brinklow pointed to a 2017 Stanford paper which estimated that rent control increased median rents citywide by roughly six percent since 1994.

“There’s evidence that rent control policies can lead to a reduction in rental housing stock,” Jacob Passy wrote for MarketWatch. “In San Francisco, landlords were 10% more likely to convert their buildings into condos after the city imposed rent control in the 1990s, one study found. Rents in the city ended up increasing 5.1% as a result between 1995 and 2012, costing tenants roughly $2.9 billion.”

Rent control raises rents by restricting supply without lowering demand. All else equal, when you have less supply of anything with the same or growing demand, prices rise. This happened in Berlin and in the Mission District of San Francisco where under rent control, landlords took their units off the market to avoid getting stuck with rent-controlled tenants who won’t leave. They will live in their units, convert them to other uses, sell them to be converted to other uses, or simply keep them empty hoping that rent control goes away. Besides encouraging landlords to exit the rental business, rent control also reduces supply by discouraging future landlords to from buying properties to rent out.

How rent control benefits the wealthy

The majority of people who benefit from rent control are whiter and wealthier than your average renter. Dougherty cites a 2002 study showing that households with incomes over $100,000 occupied a quarter of San Francisco’s rent-controlled units. “That number has to be much higher today,” Dougherty writes.

The wealthy are better able to navigate and game the rent control system, passing their apartments on to their children in New York City, for example. In the rest of the world, wealthy people have to move less often for work or family than the poor, allowing them to stay in rent-controlled apartments longer.

Another way rent control benefits the wealthy is that landlords often convert their rent-controlled apartments into luxury condos. In one study a rent control ordinance attracted residents with incomes at least 18 percent higher than existing residents.

“Taking all of these points together, it appears rent control has actually contributed to the gentrification of San Francisco, the exact opposite of the policy’s intended goal,” Economics Professor Rebecca Diamond wrote for Brookings.

How rent control incentivizes blight

Landlords with tenants who pay far less than market rates due to rent control usually don’t maintain their properties, and will often harass their tenants into leaving, leading to health hazards and substandard living conditions.

Failure to maintain property can be deadly for tenants. In 2016 the Ghost Ship caught on fire, killing 36 people. The building had many tenants, despite having no heat, no fire alarms, sprinklers, or emergency or exit lighting.

Rent control proponents say building inspections will force landlords to maintain their properties. Yet Oakland’s corrupt and bungling building inspectors evaluated Ghost Ship several times, at one point confiscating extension cords tenants were using to light rooms, leading renters to light their rooms with candles that may have contributed to the blaze.

How rent control immobilizes low-income families

In one study, residents under rent control were 19% less likely to move than the control group. Rent control means low-income renters can’t move closer to better jobs. This kind of labor inflexibility hampers economic growth and productivity. It also means long commutes for low-income families, which are associated with negative outcomes such as divorce, insomnia, diabetes, and even pregnancy complications.

Peter A. Tatian of the Urban Institute summarized recommendations I saw over and over again:

A better approach may be adopting policies that encourage the production of more diverse types of housing (different densities, tenure types, unit sizes, etc.), implementing strong regulations and practices to ensure housing quality and to protect tenants from abuses; and providing targeted, direct subsidies to people who need help paying their rents.

All that said, I don’t think rent control is the hill to die on. It sucks, sure. But it does have one redeeming quality in that it prevents some people from getting displaced today. Plus, building more housing solves all the problems it creates. And, you’re never going to get urban progressives to abandon rent control.

We must abolish every regulatory impediment to building so much housing that supply exceeds demand. That’s the only way to lower average rents and prevent displacement. We must get rid of exclusionary zoning, by-right permitting, and local control of land-use decisions.

But, even if we did all that tomorrow (in which case I would jizz my pants to the moon), new housing takes years to come online. Families are being evicted today.

Plus, progressives seem completely incapable of accepting any fact about rent control other than that it helps prevent displacement for a few select people. Nevermind that it causes more net displacement by raising rents. And when they do on occasion accept consensus reality about the impacts of rent control they spin up fantasy scenarios in which government is competent and can fix the problems rent control solves. Like, no, I’m sorry, in reality the Department of Building Inspections is not going to force every landlord to maintain their properties. They’re going to go in on occasion to inspect and then make the warehouse that illegally houses people and should be condemned even more dangerous.

Anyhoodle. You’re not going to convince these people, it doesn’t raise average rent that much compared to exclusionary zoning, which is both racist and without any redeeming qualities whatsoever.

So I hope the net effect of this post is that everyone tempted to argue about rent control understands that there’s really nothing to argue about. The academic consensus and real-world experience is super consistent. Rent control sucks, but you’re not going to get rid of it and it really doesn’t matter compared to exclusionary zoning. So fight about that instead.