March 13, 2024 — American Institute for Economic Research
The Washington State House has passed a bill to cap rent increases at 7 percent a year. The Senate has yet to vote on it, and the governor has not taken a position. If enacted, this law would hurt renters, including low- income renters.
Advocates of the legislation call it “rent stabilization” rather than “rent control,” because “rent control” has gotten a bad name over the years (and for good reason). But in practice, it works the same way.
Capping rents means lots of people will want to rent at the capped rate, but fewer units will be available to rent, creating a shortage. After all, owners of apartment buildings can put their units to alternative uses, selling them off as condos, converting them to office spaces, occupying the units
In the long run, rent caps encourage apartment owners to skimp on maintenance as well. So fewer units are available, and they are of lower quality
The Washington legislation exempts apartments built in the past 10 years. But the law could still discourage new apartment construction. After all, builders have to keep in mind the possibility that 10 or 15 years from now, those new units themselves will be added to rent stabilization. This is precisely what has happened in New York over and over again.
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March 7, 2024 — Forbes
There is no pixie dust in rental housing, only rent. Like any other business, owners and investors in rental housing product depend on customers paying for the product and that what they are paying and can pay is enough to cover costs. But when it comes to housing, a combination of wishful thinking, misinformation, and a desire for chaos shapes advocacy for rent control, a policy that arbitrary limits tracking rents to costs. Most rent control supporters will argue one of two things or both; rental housing is all profit and housing is a right and should be free of charge. Growing concerns about one New York bank are once again proving that basic economics, not egalitarian fantasy, are what govern how rental housing works in the United States.
First, its important to note that rent control doesn’t work, failing everywhere to achieve its stated goal of lowering rents for people who earn less money. There isn’t a single place with the measure that doesn’t have stubbornly high housing costs; this is because rent control, among other things, discourages and complicates the development of new rental housing. This means less supply and higher prices. Worse, because of what’s going on with banks who lend to buildings and projects with rent control, there may be even fewer rental housing units around, making the problem of scarcity even worse.
According to its website, New York Bancorp (NYBC) is “one of the largest regional banks in the country” with assets of $116.3, $85.8 billion in loans, $81.4 billion in deposits, and $10.8 billion in shareholder value (NYBC is publicly traded). But recently, the company has become something a canary in the coalmine for the troubled commercial real estate market, at least in New York City. Stories in the Wall Street Journal, Yahoo Finance, Reuters, The Real Deal, and others have raised concerns about the recent drop in NYBC’s share value. But each of the stories has also pointed out something else: the effect of rent control.
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In first months since passage of St. Paul’s rent-control ordinance, housing construction is way down
MinnPost - March 10, 2022
When St. Paul’s rent control ballot measure passed in November, it contained a unique provision for national rent control policies: there was no exception for new housing construction. Typically, in order to make sure that new homes still get financed and built, rent control policies only apply to older apartments, either exempting buildings for a certain period of time or only including buildings built before a certain date. The policy laid out in the St. Paul referendum had no such exception.
With the passage of the rent control ordinance, there’s now a useful real-world experiment taking place. Was the conventional wisdom true that rent control would reduce housing construction, and if so, to what degree? Or is it possible to apply rent control to new housing without impacting the new apartments that cities like St. Paul need?
Building permits down over 80 percent
With three months of data on the books since the passage of the rent control measure in November, results are rather grim for anyone hoping for new apartment buildings in St. Paul. Compared to the same period during the previous year, multifamily building permits are down over 80 percent. Meanwhile, in Minneapolis overall construction is up as the economy has rebounded.
Read the article.