Housing Crisis 2022: Rent Control Bubbles To The Surface Again

Rent control has never been as American as apple pie.

In most parts of the country, the idea is a nonstarter, blocked by state laws, lobbied against vigorously by multifamily owners — or flat-out rejected by voters.

Yet rent control initiatives are now on the upswing, even if only in a limited number of places.

The current housing crisis, brewing since the 2008 recession, and made much worse by the coronavirus pandemic, has given new life to the concept, experts told Bisnow this week.

Not only that, rent control is taking on new forms, with many initiatives focused on limiting sudden surges in rents rather than building a legal framework for micromanaging rents.

"There's more receptiveness to price controls when it comes to rent than even a few years ago," said Michael Spotts, a senior visiting research fellow at Urban Land Institutes' Terwilliger Center for Housing. "The conversation has shifted."

The new wave of rent control has its nexus on the West Coast, rather than the East, though there has been activity there as well. 

In late 2019, the California legislature passed a law capping rent increases statewide at 5% plus the consumer price index, effective for properties that are more than 15 years old. 

Oregon was ahead of California when it passed the first statewide rent control law in the nation in early 2019. Under the measure, annual rent increases are capped at 7% plus inflation statewide, though new apartments are exempt from the cap for 15 years, like in California.

While the Oregon and California laws might be better known than other initiatives, the push for rent control is bubbling at the local level in places where state law allows it — and even in some places where it doesn't.

In November, voters in St. Paul, Minnesota, approved a rent control ordinance — called rent stabilization — that will take effect in May. The measure allows a 3% increase in rents each year and, unusual for newer rent control measures, it applies to all apartments, including newly constructed ones. 

In Montclair Township, New Jersey, the township council passed a new rent control ordinance in April that allows landlords to raise rents by 6% immediately, provided their properties abide by the local rent freeze in place since May 2020. After that, landlords will be limited to an increase of 4% annually (or 2.5% for units occupied by seniors).

In March, activists in Pasadena, California, completed a signature drive to place rent control on the ballot in November. If passed, the initiative would limit increases to once a year, with a maximum of 75% of the annual increase in the consumer price index.

In Arizona, state Sen. Martin Quezada has proposed a bill that would introduce statewide rent control by capping annual rent increases at 5% or the rate of inflation, whichever is lower. 

Quezada acknowledges that rent control is an uphill effort in Arizona, where state law bans it at the local level but told News Break that the housing crisis is so bad in the state that the idea might get some traction now.

The high cost of rental housing has been an important factor in the revival of rent control, Spotts said, but not the only one. The new crop of policy proposals tends to be less restrictive than the price controls put into place on a limited basis in the past, and thus a little more palatable to policymakers. 

SMI Real Estate principal broker Steve Morris, who specializes in multifamily brokerage in Oregon and Washington state, said that political support for rent control has been growing. 

"Government can count votes, and there are far more tenants than landlords," Morris said. "Rent increases have been breathtaking — like most larger cities — yet no one has a good explanation for it, since Oregon's population growth, especially Portland's, is flatlining."

Even so, he said, affordable housing is an evergreen issue since "95% of tenants think their rent is not affordable."

Advocates for the 2020s wave of rent control also talk of protecting renters from sharp and sometimes unpredictable increases in rent. 

"The policies being discussed now more often than not are called anti-gouging," Spotts said. 

Supporters of the California rent control bill went out of their way not to call it "rent control," for example.

“Our bill is a rent-gouging bill, as opposed to rent control,” California Assembly Member David Chiu, the author of the Tenant Protection Act, told Bloomberg after the bill passed.

Chiu, who represents San Francisco, said the goal was to balance the need for tenants not to suffer "egregious rent increases" with the need of landlords to have "a fair rate of return."

That is a far cry from the goal of simply freezing rents for an unspecified period.

Beginning in the 1920s, and especially during World War II, places such as New York City strictly regulated rent increases, in part to keep housing development in check so more resources could be devoted to the war effort. Much of that regulation disappeared after the war, but the housing crisis of the 1960s and 1970s revived rent control somewhat.

Unlike the strict first generation of rent control, the policies of 50 years ago usually allowed periodic rent increases and also applied to certain building types rather than to all tenant-occupied housing. These second-generation rent-control laws are often referred to as “rent stabilization," notes a 2019 report by the Urban Institute, and were typically adopted in a few large coastal cities, especially in the Northeast and in California. 

Now the new style of "anti-gouging" rent control is also seen — in a few places — as more doable than other affordable housing initiatives, as well as a response to declining federal support for affordable housing.

Historically rent control has been useful in some places and at some times, but there are more efficient tools when it comes to providing low-income housing, Lance Freeman, a professor of city and regional planning at the University of Pennsylvania, said during a virtual conference put on by Harvard's Joint Center for Housing Studies in September.

Even so, rent control might be considered effective now in some places because the other tools aren't always available, he said.

"We seem to lack the political will to fully implement those other tools, such as housing vouchers," Freeman said. "In some cities, it may be more politically feasible to enact rent control."

The growing popularity of both rent control and inclusionary zoning also reflects, at least in part, the decline of federal support for housing assistance, Brookings Institute Senior Fellow Jenny Schuetz wrote. 

"But over the past several decades, the share of eligible households receiving federal housing assistance has declined," Schuetz wrote. "Cities are left to face the consequences: housing instability and homelessness take a toll on local resources."

At the national level, rent control is advocated by only a few members of Congress, whose proposals have little chance of moving forward in that divided body. 

Running for president in 2020, Sen. Bernie Sanders, an independent from Vermont who caucuses with Democrats, called for a national cap on annual rent increases at no more than 3%, or 1.5 times the consumer price index, as well as the implementation of a “just-cause” requirement for evictions nationwide.

In 2019, U.S. Rep. Alexandria Ocasio-Cortez of New York also proposed a 3% cap on rent increases, as part of a larger package of anti-poverty bills that didn't advance very far.

Objections to the new wave of rent control rely on similar arguments against the policy that have been made down the decades. Broadly, such laws are believed to interfere with free markets. More specifically, classic rent control laws that freeze rent increases for long periods — the kind that New York City is known for, though they apply only to a small fraction of units — are seen as undercutting the value of owning apartments so much that developers stop developing them.

“The complete freeze on new construction in St. Paul is the latest example of why rent control is used in Econ 101," National Multifamily Housing Council Vice President Jim Lapides said, pointing to the sharp drop in new multifamily construction in that city in early 2022.

"Rent control has been shown to exacerbate housing shortages, disproportionately benefit higher-income households and ultimately exacerbate the very problem it tries to solve," Lapides said. "At a time of rising prices and soaring demand, we should look for policy approaches that actually support the creation of desperately needed housing."