By Adam Pagnucco.
In my recent series on rent control, I outlined Takoma Park’s terrible record of building housing under its tough rent control law. Specifically, the city has been losing housing units, it has trailed other similarly dense Downcounty areas in residential construction and it compares poorly to almost all other local areas in Maryland in housing built after 1980. Economist and city resident Salim Furth found that the city’s rent control law has led to condo conversions. And now, a reader has brought to my attention a report on housing commissioned by the city in 2017. And according to the report:
The city’s rental housing market is even worse than I depicted it.
The report, authored by Landover consultant Cloudburst Group, is a deep dive into Takoma Park’s housing market, both owner-occupied and rentals, and has comparisons to Montgomery County and nearby census tracts in Montgomery, Prince George’s and D.C. Following are some of the major findings.
The city’s housing market is “very tight.”
Takoma Park has a very tight market among rental and sales units. Severely low vacancy rates compounded by a virtual lack of development opportunities and a much older housing stock than elsewhere in the region have contributed to a decline in the young adult population. This runs counter to national trends and is significant because this age cohort is driving growth elsewhere in the region and the U.S.
The population of young adults in the city has been falling and they may “struggle” to find housing in Takoma Park.
The City’s senior population (ages 65+) grew by 24.7% between 2000 and 2015. The City’s young adult population (ages 18-34) shrunk by 7.1% in the same time period, but the young adult population grew by 17.4% in Montgomery County and by 22.7% in the Comparison Tracts…
Nationally, young adults (ages 18-34) are driving the housing market, comprising 42% of all homebuyers and 56% of all renters. This population is growing in the metropolitan D.C. region; by 17.4% in Montgomery County, and by 22.7% in the Comparison Tracts from 2000 to 2015.
In Takoma Park, however, this segment of the population shrunk by 7.1% in the same period. Given the City’s proximity to transportation, higher education, jobs, and the amenities in the D.C. region, this could indicate that young adults struggle to find suitable or attractive housing in Takoma Park.
Takoma Park lost almost a fifth of its rental units between 2000 and 2015.
Although the City has a large proportion of renters, housing tenure in Takoma Park has shifted towards homeownership over the past decade. In 2000, 45.4% (3,128) of occupied housing units were owner-occupied, compared to 54.6% (3,765) renter-occupied housing units. In terms of numbers of housing units, those occupied by renters decreased by 670 between 2000 and 2015, while occupied housing units increased by 301.
And here is the money quote:
No new multifamily rental buildings have been constructed in Takoma Park since the 1970s. Several multifamily buildings, however, have been constructed or are planned just outside City limits in D.C. and in Silver Spring.
Takoma Park passed its rent control ordinance in 1981. That corresponds neatly to the end of rental building construction in the city.
The report blames Takoma Park’s lack of residential construction on the assertion that it is “built out.” But as we have previously seen, Downtown Silver Spring and Downtown Bethesda are at least as dense and have seen vastly more residential construction. All three areas are near D.C., are covered by the same zoning laws and are governed by the same planning agency and the same county council. Rent control is the primary differentiator between these areas and its effects are obvious.
The findings aren’t all bad. Takoma Park’s rents are lower than market estimates. But that is offset by the city’s steady loss of rental units. Overall, Takoma Park’s rent control law has created a severe housing shortage of the kind that has been found over and over again in decades of economic literature.
In one important way, the rent control bill introduced by Council Members Will Jawando and Kristin Mink, which is supported by County Executive Marc Elrich, is actually tougher than Takoma Park’s. The city’s law limits rent increases to the change in the Washington area’s CPI-U. This year, that translated to a maximum increase of 7.3%. The Jawando-Mink-Elrich bill limits annual rent increases to the change in the rental component of the Washington area’s CPI-U or 3%, whichever is lower. So their legislation could cause an even more devastating rental housing shortage than what Takoma Park has experienced. That leads to perhaps the most important question in MoCo’s rent control debate.
What good is low rent if people can’t find rental units?