By Adam Pagnucco.
The county council’s Office of Legislative Oversight (OLO) has released economic impact statements on the council’s two rent control bills and they conclude what the overwhelming majority of economists already know: rent control damages the economy.
There are two rent control bills.
Bill 16-23, introduced by Council Members Will Jawando and Kristin Mink and supported by County Executive Marc Elrich, would limit rent increases to 3% or the increase in the rental component of the CPI, whichever is lower.
Bill 15-23, introduced by a majority of the county council, would limit rent increases to 8 percent plus the CPI.
You can read how the provisions of these bills compare to other rent control regimes around the region in this post.
Let’s start with the economic impact statement on Bill 16-23, the Jawando-Mink-Elrich bill that resembles the tough rent control law in Takoma Park. The statement begins:
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The Office of Legislative Oversight (OLO) anticipates that enacting Bill 16-23 would have a moderate to large net negative impact on economic conditions in the County in terms of the Council’s priority indicators. The Bill would establish a rent stabilization policy that would prohibit annual rent increases either above 3 percent or, if lower, the rental component of the Consumer Price Index (CPI) for certain rental units. Based on a review of peer-reviewed economic studies on rent stabilization, OLO concludes the Bill likely would significantly reduce rents for certain tenants of rent-regulated units. Certain property owners and managers likely would respond by decreasing operating expenses, or removing properties from the rental market (i.e., through condo conversion). Based on their relative economic multiplier effects, reduced landlord spending likely would yield economic costs that exceed the economic benefits of increased household spending (holding all else equal). Moreover, extending the rent stabilization policy may moderate certain residential property values and/or decrease the County’s competitiveness in the rental housing market relative to jurisdictions in Northern Virginia that lack rent stabilization policies.
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The statement then considers many pros and cons for tenants in regulated units, tenants in non-regulated units and businesses before concluding, “OLO anticipates that enacting Bill 16-23 would have a moderate to large negative economic impact on overall economic conditions in the County in terms of the Council’s priority indicators.”
OLO also analyzes Bill 15-23, the weaker rent control bill introduced by the council majority. The statement on this bill begins:
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The Office of Legislative Oversight (OLO) anticipates that enacting Bill 15-23 would have a small to moderate net negative impact on economic conditions in the County in terms of the Council’s priority indicators. The Bill would establish a rent stabilization policy that would prohibit annual rent increases more than the sum of local annual Consumer Price Index for All Urban Consumers (CPI-U) plus 8 percent for certain rental units. Based on a review of peer-reviewed economic studies on rent stabilization, OLO concludes the Bill likely would reduce rents for certain tenants of rent-regulated units. Certain property owners and managers likely would respond by decreasing operating expenses associated with ordinary maintenance and repair, or removing properties from the rental market (i.e., through condo conversion). Based on their relative economic multiplier effects, reduced landlord spending likely would yield economic costs that exceed the economic benefits of increased household spending (holding all else equal). Moreover, extending the rent stabilization policy may moderate certain residential property values and/or decrease the County’s competitiveness in the rental housing market relative to jurisdictions in Northern Virginia that lack rent stabilization policies.
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Again, OLO goes through the pros and cons of this bill for various parties before concluding, “OLO anticipates that enacting Bill 15-23 would have a small to moderate economic negative impact on overall economic conditions in the County in terms of the Council’s priority indicators.”
The economic impact statements are not yet online but I have obtained and uploaded them. Click on the links below and you can view them.
Economic Impact Statement – Bill 15-23
Economic Impact Statement – Bill 16-23
OLO’s conclusions track those of decades of economic literature on rent control. Strong rent control laws deliver some benefits to covered tenants but have massive economic costs. Takoma Park’s rent control law, for example, has coincided with forty years of no new multi-family rental buildings and an overall loss of rental units. Weak rent control laws, like the one in the District of Columbia, deliver fewer benefits but have lower costs.
So now the council faces a decision. What’s more important? The economy? Or politics?