In December 2022, $1,981 was the typical monthly rent in
the United States.
A 7.4% increase from the year prior.
The Covid pandemic, along with record breaking
inflation, drove up rent prices in America to
unprecedented levels.
As the pandemic was alleviating, people were
going back into the housing market, and that created a
really significant pressure on supply.
In terms of what's happening right now, we are
already seeing those prices falling and they're falling
at a fairly rapid rate.
Rents are going down now.
We ended 2022 with four straight months of rent
cuts. And then in January, rents were flat for the
first time since the great financial crisis.
But while rent has begun to stabilize nationwide, rent
affordability still remains difficult for many
Americans.
All you need is one illness.
All you need is one pandemic to make your life
more difficult.
There's literally nowhere in the country where a tenant
is not burdened by their rent.
More than 19 million renters in America are rent
burdened, spending more than 30% of their income on
housing costs. Evictions are also climbing rapidly
with the end of Covid-era protections.
There have been more than 2 million evictions since
March of 2020.
Indeed, just ten states and 34 cities tracked by The
Eviction Lab. In response, support for rent control
policies has gained traction.
We've already seen rent control be implemented in
California, Oregon, in cities like Washington,
D.C., and New York City, as well as Saint Paul in
Minnesota. So I would say it's definitely making a
comeback.
So can policy make rent more affordable in the United
States? And if so, what would those policies be?
Rent regulation refers to laws that limit rental
prices in cities or states.
Generally, it comes in two types: rent control and rent
stabilization.
To me, they're basically the same for this kind of modern
generation of rent control laws, I think.
In New York City they do make a distinction between
rent control and rent stabilization.
That's basically because there is a very old housing
stock there built before the war, essentially 1940,
47. Those are under true rent control, meaning that
they fixed the level of rent.
But then the modern wave of rent control policies
typically allows more flexibility in the amount of
rent increases. In California, the annual
allowable increase in rent is about 5% plus the changes
in local consumer price indices, or 10%, whichever
is lower.
Today just seven states, California, Maine, Maryland,
Minnesota, New Jersey, New York, and Oregon, and
District of Columbia have some form of rent control at
the state or local level.
Experts say that rent control policies that
specifically target low income tenants could be
beneficial.
When I talk about targeted rent control, I'm really
speaking about affordable housing programs like the
low income housing tax credit, where low income
households can qualify to live in a quality rental
property at a well below market rent.
And those rents are set based on income year after
year. And so it's a very positive program because
you're directing the aid specifically to those who
need it.
Tenants living with rent stabilization say it plays a
big role in their financial stability.
Thalia Da Costa, a New York City tenant living in a
rent-stabilized apartment, has experienced what it's
like firsthand.
The problem with working in the entertainment field is
that you don't know when your next gig is coming.
When Covid happened, I had no idea where rent was
coming from. Luckily, we had a lot of programs to
help out with that, but I was still down $60 to
$75,000. Once I learned the laws with rent
stabilization, like it's a totally different ball game.
They protect us.
They have to treat our apartment better.
So I feel really sorry for people who don't live in a
rent stabilized apartment because you have no idea if
your rent is going to go up $500.
Rent control could help boost a sense of community
by preventing unfair displacement and
gentrification.
This is where my grandmother bought a house in 1958.
This is where my mom moved at 15 and went to high
school up the street.
Rent stabilization keeps diversity.
A socioeconomic mix is why I live here.
There are people on welfare.
There are $4 million homes right on this street that I
was born on. I don't like the homogenized
neighborhoods that plague New York.
That's not New York.
This isn't the first time that rent control policies
have gained widespread support.
After the massive economic disruption caused by World
War II, the Federal Government once imposed rent
control on roughly 80% of rental housing between 1941
and 1964.
But over time, it was abandoned because prominent
economists unanimously argued against the policy.
That sentiment mostly continues today.
There's various surveys of economists. One done by IMG
showed that only 2% thought that rent controls in places
like New York and San Francisco were having a
positive impact on affordable housing.
There's been other studies showing that the removal of
rent control has actually had a positive impact on
communities.
Economists argue that rent control would deter
developers from building more houses, which would
only worsen the housing supply crisis in the United
States. America already suffers from a deficit of
3.8 million homes, especially at low income
price points, according to Habitat for Humanity.
We have not invested as a nation in building a supply
of housing in a variety of communities and a variety of
different price points.
We've instead relied on the private sector to do so.
And the private sector has the expertise to leverage
that capital and the expertise and the knowhow to
build those units. But unless that money comes into
the market and investors see that as a better
investment than some other kind of equity or some other
kind of investment, they're not going to come.
Preventing healthy turnover in the housing market could
also hurt marginalized communities.
If there's a rent stabilization program in
place, you're really incentivizing the renter
that's in that unit today not to move.
And what does that mean for renters that want to be in
that neighborhood or want access to housing?
They're shut out because that private market capital
isn't available to build additional units.
And who's the most growing segment of our population?
It's people of color.
Not only are we not doing anything to help them, we're
actually hurting them by interfering with what would
otherwise be general healthy turnover in the
rental market.
Our research has shown that in the longer run it
actually leads to an overall reduction of
affordable rental housing supply and actually fuels
gentrification and increases the income
inequality. Our study do find evidence that are
consistent with landlords trying very hard and trying
actively to get out of rent control over the longer run
by substituting their rental units to other types
of housing that overall better cater towards higher
income residents.
So since I've lived here so long and there were people
who had lived here for decades, I knew that they
were trying to get me out.
I knew that they wanted to get rent stabilized people
out so that they could do renovations and hike up the
rent. My apartment was falling apart.
I had black mold, then I had paint falling down.
I found lead paint.
My super does not listen to me.
I knew exactly what they were doing.
It was ignoring me.
It was telling me I'm the only person that has any
problem out of all of their buildings.
All it said to me is that you want me out of this
apartment so that you can raise the rent $1,000.
That's what they wanted.
Bedford Holdings told CNBC that they deny these
allegations and have addressed every issue in Da
Costa's apartment.
Perhaps the biggest flaw of rent control policies is
that it may only be a short term solution.
Housing has always been a bipartisan issue.
It is a basic human need.
And so people on the right and on the left have
supported various housing policy initiatives to create
more housing. Unfortunately, we're in an
environment now where politicians are looking for
expedient short-term solutions to respond to
concerns that their constituents raise and rent
control appears to be a very expedient solution, but
it is a lot more complicated and in fact
hurts the very folks that it purports to help.
In January 2023, several progressive Democrats urged
the federal government to take action against soaring
rent prices. They suggested the Federal Housing Finance
Agency to establish renter protections for individuals
residing in properties financed with government
backed mortgage properties, including anti-price,
gouging protections and just cause eviction
standards. They also requested the Federal Trade
Commission to issue new regulations defining
excessive rent increases as a practice that unfairly
affects commerce.
That is going to be challenging.
Given that response and feedback we've already seen
at a more local level, such as at the state level.
But there are still other solutions besides rent
control that could help alleviate the rent hikes
across America. The first and most important step is
to build more affordable housing to go around.
That's the role of the government. The federal
government is to build more government-owned, affordable
housing, because that's really what's missing.
The private market cannot fill the gap that is created
by the fact that we have so many people living on
minimum wage.
Tax incentives could not only boost new construction
of affordable rental housing, but also provide a
reason for landlords to keep rent prices low.
There are opportunities at the state and local level to
provide tax abatement, real estate tax abatement, for
owners that are willing to provide housing and limit
rents for a certain period of time for a certain number
of units. We've seen those happen in a number of states
and those can be successful strategies.
Until supply catches up with demand, certain governmental
programs can help fill the gap.
We really need to expand housing vouchers.
We're seeing long waiting lists all across the
country. In Los Angeles, for instance, they recently
reopened their waiting list for the first time in five
years, they were expecting something like 365,000
applicants, but only had 30,000 spots.
We're at a sort of inflection point where more
investment on that side would certainly, I believe,
help the folks at the lowest end of the income
ladder, and that would help push prices down.
Policy backed by proper research can lessen the
burden for more than a third of Americans that pay
rent across the country.
It's so important to bifurcate between where the
challenges are and where they aren't.
Everybody looks at rental housing as one big bucket,
but it's a diverse, large group of people from
different income levels, different walks of life, and
it's so important not to talk about renters as one
big group, but really focus on the renters who are most
in need. And I think that the more we can focus our
conversations and our policy on renters in need
and the more targeted we are with our solutions, I
think the more effective we'll be in solving for it.