Rent-Control Measures Are Back as Home Rents Reach New Highs

Lawmakers across the US are looking to enact rent controls and revive policies that have been largely shunned in recent years to stem the rise in home rental prices across the country.

These proposals, which would generally allow landlords to raise monthly rents by no more than 2% to 10%, are on the legislative agenda in more than a dozen states. According to real estate agent Redfin, rental prices have risen about 18% on average over the past two years corp

Reaching record levels in the US

Major cities like Boston, affluent suburbs like Montclair, NJ, lower-income trailer parks in Colorado, and fast-growing metropolitan areas in Florida are among the places now considering rent caps.

“Rents are exploding much faster than incomes,” says Stijn Van Nieuwerburgh, an economist and professor at Columbia Business School who studies rent control. “The problem is now worse than ever. And probably a lot worse.”

Rising rents are a major contributor to the recent surge in inflation that is beginning to weigh on the US economy. Accommodation costs make up 40% of the core CPI, the largest component of the CPI. Economists at the San Francisco Federal Reserve said in a February inflation forecast that rent increases “point to significant upside risks to the broader inflation outlook.”

Rent control policies in the US date back to the years after World War I and World War II, but the concept enjoyed a major resurgence in the 1970s, a period of high inflation. Their resurgence has been rather short-lived, and many lawmakers have argued that rent controls hurt housing markets more than they help tenants, discouraging new construction and discouraging housing maintenance.

More recently, some economists and politicians have reconsidered this way of thinking, pointing out that rent control is one of the few ways to protect low-income tenants, who often face the greatest difficulties. In 2019, New York Congresswoman Alexandria Ocasio-Cortez proposed a national rent control law. California and Oregon introduced rent control bills that same year, which are now law in both states.

Affordability issues deepened during the pandemic. Real estate prices reached record highs in most parts of the country, forcing tenants to pay ever-increasing rents.

Some cities are considering more restrictive rent caps than previously thought. St. Paul, Minnesota enacted the only rent control in the Midwest last fall and now has one of the strictest policies in the country. While many rent control measures make exceptions for new construction or vacant units, St. Paul’s Law does not.

St. Paul, Minnesota recently approved rent controls.


Photo:

Nicole Neri for the Wall Street Journal

In Santa Ana, California, local officials have gone beyond the state rent control measure, which limits annual rent increases to 5% plus local inflation, to limit local rent increases to 3% for homes built before 1995.

These measures were passed despite laws in both states that generally prevent local governments from writing their own rental rules. But in these cases, proponents found workarounds.

Other rent control efforts also have to overcome bans that still exist in more than two dozen states. First-term Boston Mayor Michelle Wu, for example, has campaigned to bring rent controls back to the city, and a poll shows a majority in the city would support it.

But local rent controls were banned there in a nationwide referendum almost three decades ago. Massachusetts Democrats are introducing a bill that would overturn this state ban, though Republican Gov. Charlie Baker has said he is unlikely to sign such a law.

Demonstrators in Chicago last year called for the ban on rent control to be lifted.


Photo:

Max Herman/Zuma Press

In Florida, another state that is anticipating local rent controls, lawmakers in Miami and Tampa — where asking rents have risen more than 30% over the past year — have debated declaring housing emergencies to pass rent controls.

The real estate industry successfully pressured several states into writing anti-rent rate control laws decades ago, and the industry is back in action. “We view it as an existential threat,” said Jim Lapides, a spokesman for the National Multifamily Housing Council, a landlords’ association.

Building owners continue to argue that rent control will inhibit the supply of new housing and ultimately worsen the rental market for everyone. In St. Paul, for example, developers have put more than a third of proposed housing units on hold over concerns about the new law there, according to real estate management software company RealPage, which has compiled permitting documents and public reports and interviewed builders.

However, some lawmakers see no better way to meet the rising rent burden. Florida State Sen. Victor Torres, a Democrat representing parts of the greater Orlando area, proposes repealing Florida’s rent control ban. Mr Torres said retail and hospitality workers in his district routinely face staggering increases on even the most modest one- and two-bedroom apartments.

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“You renew your lease and it says we’re increasing your lease by $500 a month,” he said. “Who can afford that?”

In Colorado, State House Representative Andrew Boesenecker wants to limit mobile home rentals to 3% each year or the local inflation rate, whichever is higher. Mr Boesenecker, whose district includes part of Fort Collins, said rent controls are not enough to alleviate the state’s housing problems. There is also a shortage of supply, but significant rent increases for RV sites require a faster response.

“We’ve seen rent increases of up to 50% everywhere,” said Mr. Boesenecker. “We must do something to protect this affordable housing source.”

write to Will Parker at will.parker@wsj.com

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