Rent Control Cannot Fix Housing Shortages

June 17, 2020
By Trevor Bratton

Rent control is making a comeback. California and Oregon have strengthened current rent control protections by implementing statewide mandates. Leftist politicians like U.S. Representative Alexandria Ocasio-Cortez of New York have demanded a rent freeze. Now, in Massachusetts, some in the legislature are looking to undo the will of voters who acted to ban rent control in 2014.

Using a package of bills, Massachusetts lawmakers are trying to resurrect a policy that was buried by a 1994 voter-approved initiative. The bills, which moved through the legislature’s Joint Committee on Housing after a 13-2 vote, would allow municipalities to cap annual rent increases for tenants who make 80% of the area median income or less. The bills currently sit in the House Committee on Steering, Policy and Scheduling. As compassionate as these reforms seem, they are really a shortsighted Band-Aid to a complex and often deep rental and housing market wound.

The loudest voices often champion rent control as a commonsense reform, but that view rests on a faulty assumption that landlords are a particularly heinous and greedy group that plunders and steals from tenants at every opportunity. Of course, while there are some landlords that may try to exploit their tenants, most are simply trying to succeed in a free market by providing a desirable service.

But while both opponents and proponents of rent control often possess the same goal of making housing more affordable for relatively low-income residents, the “commonsense” stance treats rent control as the only solution to a complex and difficult problem—but in reality, it’s a problem that rent control simply cannot fix and may in fact make worse.

A classic rule of economics is that as prices rise, people are willing to supply more of that good. Rental housing is no different, and this phenomenon holds the key to fixing housing shortages. Strict land use regulations and rent control, however, do the opposite.

When land use controls are strict, supply can’t keep up with demand. Then, when a municipality places rent controls on top of this supply issue, landlords and developers want to supply even less housing; they convert rental units to condos, build owner-occupied units, or simply move to a different geographical market altogether. Curing housing shortages caused by strict land use regulation with rent control is like trying to cure cancer with ibuprofen: It only allows the problem to get worse while the “cure” does little to nothing.

Massachusetts, however, isn’t out of luck. In fact, they have solid tools to address their rising housing costs without rent control—and fixing the problem starts with actual commonsense reforms. The Goldwater Institute’s Property Ownership Fairness Act above all else protects private property rights and signals to bureaucrats when zoning regulations are driving up costs. Another reform, the Permit Freedom Act, requires the permit process have clear deadlines and requirements plus legitimate judicial review. These reforms assure the burden of proof lies on government rather than prospective permit holders.

Massachusetts has an opportunity to make meaningful reforms that benefit its citizens in the long run by addressing the causes of its housing problems rather than the symptoms. It won’t be easy, but Massachusetts should consider a smorgasbord of options to improve its housing situation for its citizens instead of taking the easy and ineffective road of rent control.

Trevor Bratton is a Policy Analyst Fellow at the Goldwater Institute.