May 3, 2006
Council Considers Change in Rent Control Policy
It's one of the peculiarities of the interaction between economics and politics that the idea of price controls is roundly dismissed as a wrongheaded remnant of command economies while rent control maintains a prominent place in urban political debates. Economists hate the policy, with good reason, but political calculus makes it very difficult to get rid of the idea once and for all.
So it is that an updated rent control policy has gained traction in the District. According to the Washington Post, the D.C. Council yesterday gave unanimous preliminary approval to a new rent control bill, final consideration of which will come in June. The bill would eliminate the current rent-ceiling policy, which is often rendered ineffectual by ceilings set high above market rents, and it would establish a system of annual rent increase policies, all of which would only affect structures built before 1975. Says the Post:
Under the plan, which faces a final vote next month, rent increases for seniors and the disabled would be limited to increases within the rate of inflation. For all other renters, yearly jumps would be capped at 2 percent plus inflation. Rent increases on newly vacant apartments would be capped at 30 percent.
Unfortunately, the new policy could end up harming those it's most designed to assist. Rent controls will likely encourage the incidence of condo conversion in potentially affected buildings, and because the bill applies only to older housing, which is generally cheaper than newly constructed apartments, the result could be an overall reduction in the amount of housing available to lower income District residents. What's more, studies have shown that rent-controlled housing is far more likely to show disrepair than uncontrolled housing, because landlords are less likely to lose tenants from controlled buildings no matter how badly they deteriorate. In a city that already displays remarkable contrast between the haves and have-nots, this bill could encourage lower-income residents to stay in a shrinking pool of older, poorly maintained housing. Restricted supply of rental housing would also benefit home-owners, who tend to be better off than renters, while young, aspiring residents without the capital to buy would be faced with renting new, more expensive apartments in D.C. or older, uncontrolled, and more freely available housing in the suburbs.
The effects would be different if, as Council Member Marion Barry advocates, the policy were to extend to new housing, as well. They'd almost certainly be more disastrous, too -- new construction would slow drastically, and development in D.C. would likely stagnate as developers focused their attention on building market-rate structures in the suburbs.
Balancing development with concern for low-income city residents is a difficult and important task; too important to try and address with simplistic and uneconomic anachronisms like rent-control. While the 30% increase available to newly vacant apartments and a "hardship waiver" allowing some landlords to avoid the limits could moderate the bill's effect, this is, in many ways, a worrisome step for the District to take. One might hope the Council wil reevaluate its position before the final vote on the bill, but with the unanimous preliminary vote behind them, it seems likely that D.C. will be stuck with this policy, for better or worse.
Picture taken by furcafe.
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I'm disappointed to see DCist try to pass off an article written by Walter Block and posted to a Web site run by the right-wing "Liberty Fund" as making a definitive case against rent control. Not everything should be left to the "free market," and rent control can provide much-needed protection to the city's many renters--especially to seniors and low-income renters.
Mike, you might not be comfortable with that particular economist, but rent control is rountinely cited, by economists of all ideological stripes, as a bit of bad public policy that just won't go away.
Not a big rent control supporter. I have read both sides arguments but the more you look into the matter, the more you feel that the whole thing is a big mess where everyone gets dirty.
However, I do think people should be able to afford to rent. Even Adam Smith said the free market needs regulations and I would guess rent prices do as well.
Rent control has always seemed a little fishy to me, but I'm an owner now so I'm not as affected by the matter. My question is this; How does this new DC rent-control law compare to similar laws in other cities such as New York, San Francisco, or even European cities? Any informed commenters out there care to share some information?
Petworthian, that's a good question, and one I don't readily have an answer to.
Mike, check out this article on the subject by Paul Krugman, who I think we can agree is not a rabid right-winger.
In a city where real estate and rents have for the past 5 years risen at a rate that, in places, approaches 20%, while median income remained at about 60% of the metro area, some blunting of economic force majuer is appropriate. This bill greatly simplifies the formerly complex system to most people's benefit. Here's a run-down of what got passed by the council 13-0:
No more rent ceilings.
One rent increase per year at CPI plus 2% based on the rent charged.
All seniors and people with disabilities at CPI (capped at 5%)
Upon vacancy the rent on a rent controlled apartment can be raised only 10% except when a landlord can show a comparable apt at higher rent in which case they can charge a maximum 30% increase.
Less administrative costs for landlords.
Better rights than ever for tennants.
Jim Graham did the right thing- he's a hero to many for this.
Mike, here's a good post on DC's rent control from a liberal economist and housing advocate.
http://www.affordablehousinginstitute.org/blogs/us/2006/04/not_only_is_ren.html
http://www.affordablehousinginstitute.org/aboutus/index.html
Don't mess with the markets! Why can't politicians figure that out?!
Rent control tends to have the opposite effect that is intended, ironically. If you're a fan of affordable housing (and who isn't?) you have to be a little more creative to find a policy that actually benefits those that are intended. You can bet on it that the DC Council is too lazy to figure that out.
LB, such a strong comment for a guy who hides behind initials! Have you ever been to the D.C. Council? Why do you claim they are lazy?
But anyway, of course it is impossible to predict what will come of the new law, but changes were needed. You do need to balance the market demands with protecting residents that because of age or other factors can't keep up with the rising rates. While people like LB might let them rot in the street, we have goverments to protect all people, rich and poor.
As to the poor condition of rent controlled apartments, that is DCRA's failure - not the laws.
DCist Ryan that article you link to is one of the biggest pieces of propoganda poo I have even read, period. It makes sweaping broad assertions - for example. there is plenty of commmercial space because it has never been regulated. Well what a bunch of crap. Just as an example, in NYC small commericial space is not regulated and disappearing at an alarming rate. Small commercial space is a critical component to neighborhood fabric.
"Rent control tends to have the opposite effect that is intended, ironically."
This is also completely untrue. In NYC stabilization (a form of control) has been critical in keep the city center affordable to people other lawyers and bankers. Well until now that we have stabilization apartments disappearing under decontrol. No suprise that the city is bleeding artists and minorities.
All the demonization of rent regulation does is promote benefits to landlords and the most prosperous. I love how "free markets" always means free from social pressures or free from inhertance tax or anything else that threatens the sliver spoon set - meanwhile a real limit to the gas supply means we should lower gas taxes. Free Market my ass. How much corporate welfare dollars are there in real estate? Billions, genius! Rent regulation and other so-called socialist policies means there an over abundance of bull shit in the market. That's your market force Ryan.
Will,
You sound quite disgruntled and very defensive. You are evidently totally naive on this subject and have no business commenting on it.
But let me share the following: We are supposed to be in a democratic capitalist society that promotes free trade. After all those were the principles on which this Nation was founded.
Affordable housing for the physically or mentally disabled, as well as for the elderly and poor is needed. However, our society has had a policy to deal with this issue for a very long time - it is refered to as Section 8 housing, rent vouchers from the government.
Rent control on the other hand is a "pure taking". This isn't even socialism - The city council has single handedly turned this nation's capital into a place that is Russia.
Just let me know if you need me to share any more...
Will,
You sound quite disgruntled and very defensive. You are evidently totally naive on this subject and have no business commenting on it.
But let me share the following: We are supposed to be in a democratic capitalist society that promotes free trade. After all those were the principles on which this Nation was founded.
Affordable housing for the physically or mentally disabled, as well as for the elderly and poor is needed. However, our society has had a policy to deal with this issue for a very long time - it is refered to as Section 8 housing, rent vouchers from the government.
Rent control on the other hand is a "pure taking". This isn't even socialism - The city council has single handedly turned this nation's capital into a place that is Russia.
Just let me know if you need me to share any more...
Will,
You sound quite disgruntled and very defensive. You are evidently totally naive on this subject and have no business commenting on it.
But let me share the following: We are supposed to be in a democratic capitalist society that promotes free trade. After all those were the principles on which this Nation was founded.
Affordable housing for the physically or mentally disabled, as well as for the elderly and poor is needed. However, our society has had a policy to deal with this issue for a very long time - it is refered to as Section 8 housing, rent vouchers from the government.
Rent control on the other hand is a "pure taking". This isn't even socialism - The city council has single handedly turned this nation's capital into a place that is Russia.
Just let me know if you need me to share any more...
Will,
You sound quite disgruntled and very defensive. You are evidently totally naive on this subject and have no business commenting on it.
But let me share the following: We are supposed to be in a democratic capitalist society that promotes free trade. After all those were the principles on which this Nation was founded.
Affordable housing for the physically or mentally disabled, as well as for the elderly and poor is needed. However, our society has had a policy to deal with this issue for a very long time - it is refered to as Section 8 housing, rent vouchers from the government.
Rent control on the other hand is a "pure taking". This isn't even socialism - The city council has single handedly turned this nation's capital into a place that is Russia.
Just let me know if you need me to share any more...
Will,
You sound quite disgruntled and very defensive. You are evidently totally naive on this subject and have no business commenting on it.
But let me share the following: We are supposed to be in a democratic capitalist society that promotes free trade. After all those were the principles on which this Nation was founded.
Affordable housing for the physically or mentally disabled, as well as for the elderly and poor is needed. However, our society has had a policy to deal with this issue for a very long time - it is refered to as Section 8 housing, rent vouchers from the government.
Rent control on the other hand is a "pure taking". This isn't even socialism - The city council has single handedly turned this nation's capital into a place that is Russia.
Just let me know if you need me to share any more...