By Adam Pagnucco.
Rent control laws are far from uniform. They contain many provisions on their allowable increases, exemptions, new construction, hardship petitions by landlords and many other issues. Perhaps the only thing they have in common is their reliance on mandatory government price controls on housing rather than market price setting. The column below presents a summary of key rent control provisions in six local bills and laws:
The bill introduced by a majority of the Montgomery County Council.
The bill introduced by Council Members Will Jawando and Kristin Mink and supported by County Executive Marc Elrich.
The law just passed in Prince George’s County. Note that this law has a one-year duration and its provisions may change if it is renewed.
The law just passed in Mount Rainier.
The law in Takoma Park.
The law in the District of Columbia.
Maximum rent increase
Council majority: 8% plus local annual CPI.
Jawando/Mink/Elrich: 3% or rental component of local annual CPI, whichever is lower.
Prince George’s: 3%.
Mount Rainier: 60% of CPI.
Takoma Park: Local annual CPI.
District of Columbia: 2% plus annual CPI-W with more protection for tenants who are elderly or disabled.
Limit on rent increase for vacant units
Council majority: None
Jawando/Mink/Elrich: 30% above rent charged when unit was occupied BUT landlord may not reset if a tenancy is terminated “for a reason not provided for in the lease or during the first year of a tenancy.”
Prince George’s: None
Mount Rainier: Yes, 60% of CPI applies to rent paid when unit was occupied.
Takoma Park: Yes, limit applies.
District of Columbia: Up to 30% above rent charged when unit was occupied.
New rental units
Council majority: Exempt for 15 years.
Jawando/Mink/Elrich: Exempt for 10 years.
Prince George’s: Exempt for 5 years.
Mount Rainier: Exempt for 15 years.
Takoma Park: Exempt for 5 years.
District of Columbia: Units built after 1975 are exempt.
Temporary exemption for landlords
Council majority: Hardship and capital improvements decided by Department of Housing and Community Affairs subject to limited duration.
Jawando/Mink/Elrich: Landlord may petition Department of Housing and Community Affairs for a “fair return” based on income and expense information.
Prince George’s: None
Mount Rainier: Landlords may petition Rent Stabilization Board with majority of tenants for increases based on higher property taxes, capital improvements and housing services.
Takoma Park: Landlords may petition Commission on Landlord and Tenant Affairs for “fair return” increase.
District of Columbia: Landlords may petition Rent Administrator or Office of Administrative Hearings for increases based on hardship, capital improvements, services and substantial rehabilitation.
Owner-occupied buildings
Council majority: Exempt
Jawando/Mink/Elrich: Owner-occupied group homes and buildings with two units, one of which is owner occupied, are exempt.
Prince George’s: Covered
Mount Rainier: Exempt
Takoma Park: Owner-occupied group homes and buildings with two units, one of which is owner occupied, are exempt.
District of Columbia: Natural person owners who own 4 or fewer rental units are exempt.
Small building exemptions
Council majority: Single family homes and buildings with two units, one of which is owner occupied.
Jawando/Mink/Elrich: Buildings with two units, one of which is owner occupied.
Prince George’s: None
Mount Rainier: Buildings with 2 or fewer units.
Takoma Park: Single family homes and buildings with two units, one of which is owner occupied.
District of Columbia: Natural person owners who own 4 or fewer rental units are exempt.
The Jawando/Mink/Elrich bill also has a rental housing vacancy tax of $500 per year for vacant units. Interest and penalties apply to unpaid taxes.
So how strong are these regimes?
The D.C. law may be the weakest because it exempts units built after 1975 and it allows rent increases on vacant units of up to 30%. On the other hand, it is so weak that it has not deterred substantial housing construction in D.C. I wrote about this law recently.
The council majority bill is the second-weakest. It does not fully exempt new construction as D.C. does but it allows the highest increase of any of these regimes (8% plus CPI). Its supporters believe that these provisions will not deter most new housing construction but they have no way of knowing that.
The other four regimes are all strong with low increases and temporary exemptions from new construction. One is a bill and two were just passed. The only one of the four that has been in effect for decades – Takoma Park – has coincided with a virtual net halt to housing construction.
There is a huge amount of economic literature going back decades on the negative impacts of rent control. Here is a premise based on both that literature and the experiences of D.C. and Takoma Park. Weaker laws deliver little benefit but do less harm to housing markets. Stronger laws deliver more short-term benefit to covered tenants but substantially damage housing supply over time.