By Adam Pagnucco.
With the county’s rent control legislation expected to receive a council vote today, let’s recap what we have learned about rent control laws. This year alone, I have published more than 20 articles about this subject and there are sure to be more.
Here is a summary.
Should MoCo Adopt Rent Control? Part One
There is a giant mountain of academic evidence and press reports about the negative impacts of rent control laws, including shutting down housing construction, causing condo conversions, causing drops in property values and much, much more. This is why a huge majority of economists oppose it. If you really want to assess the actual impact of rent control laws, this article is the one you have to read.
Should MoCo Adopt Rent Control? Part Two
This article shows why the details of rent control laws matter by examining the one in the District of Columbia. D.C.’s law has not stopped housing growth because it applies only to buildings constructed before 1975 and it allows rent increases of up to 30% on vacant units. But its weakness has a downside because it has done little to stop market-wide rent hikes in the District.
Should MoCo Adopt Rent Control? Part Three
Here is a deep dive on Takoma Park’s rent control law which has been associated with a shutdown of housing construction. The chart below, which shows housing growth in nearby areas that are as (or more) dense and lack rent control laws is key.
Should MoCo Adopt Rent Control? Part Four
Housing supply problems, which rent control exacerbates, are the real cause of rising rents. Inflation associated with COVID and global economic conditions does not help. Check out this chart on local increases in the cost of operating rental properties and how they have greatly exceeded rent increases.
What Will Be the Impact of Rent Control in Prince George’s?
As part of a discussion about Prince George’s County’s recent passage of rent control, this column links to a Wall Street Journal article showing that “apartment rents fell in every major metropolitan area in the U.S. over the past six months through January” 2023. The reason for this national decline? “The biggest delivery of new apartments in nearly four decades is slated for this year.” Again, it’s about supply, supply, SUPPLY.
Rent Regulation Led to Condo Conversion in Takoma Park
In this guest article, a housing economist who lives in Takoma Park shows how rent control there has led to condo conversions.
City Report Reveals Devastating Toll of Takoma Park Rent Control
A report commissioned by the City of Takoma Park shows that the city has been losing rental units, has not built a single multi-family building since the 1970s and has difficult conditions for young people seeking housing. Let’s say it again: the city paid for this study.
Council Staff: Rent Control Will Hurt the Economy
The county council’s own staff analysts found that proposed rent control laws will hurt the county’s economy.
Are Rent Increases Out of Control?
Park and Planning used real estate data to calculate that the average annual asking rent increase in the county over the last decade was 2.1%. In 2021, there was a one-time spike of 9% caused by global inflation but it fell back to 2.4% the year after.
What Happened the Last Time MoCo Had Rent Control?
MoCo had rent control in the 1970s. It was allowed to expire because it resulted in the conversion of thousands of rental units into condos. This column contained the following incredible quote from a 1985 Washington Post article about the end of rent control that came from county housing director Richard Ferrara:
Montgomery County’s rent control program, like the one currently in place in the District of Columbia, also exempted nonsubsidized new construction. But developers argued that they believed that exemption alone was inadequate protection for their investments, because as long as rent control was in place, the locality could easily change its mind and subject new nonfederally subsidized construction to controls.
“Every developer that we talked to would say, ‘As long as we have rent control we don’t know what this crazy local government is going to do to us in two or three years,’” Ferrara said.
Development Already Stopping Because of Pending Rent Control
A Montgomery County-based developer wrote county elected officials that his company was going to stop its new projects in the county because of rent control. He also claimed that six other apartment developers had also decided to shift resources outside of the county and into Virginia and other jurisdictions.
How Rent Control Will Damage MoCo’s Tax Base
My real estate sources explain how apartment building owners will appeal their property assessments after rent control is passed, thereby lowering the county’s tax base.
Look folks, I don’t doubt that rent control supporters have good intentions. They genuinely want more affordable housing. But they have two problems. First, they ignore the towering volume of evidence on the negative side effects of rent control laws. And second, they don’t understand supply and demand in market economics. Every single college freshman who takes Microeconomics 101 can tell you what happens when demand grows, supply shrinks and prices are fixed: SHORTAGES. That was the case with Soviet bread lines and it’s the case in the Takoma Park housing market.
Many public policy issues feature close calls with competing bodies of evidence. That’s not true of rent control. This is a debate pitting hope, anecdote and political pressure against decades of academic research along with the actual experience of Takoma Park. Which method of policy making will our leaders embrace?
The inevitable answer awaits.