If there is one conclusion that unites economists from all sides of the political spectrum, it is that rent control is not the answer to the affordable housing crisis. There is widespread and longstanding consensus that rent control laws are counterproductive, disincentivizing the construction of new affordable housing and the maintenance of existing stock. In effect, these laws exacerbate the housing shortage they were enacted to address and, if anything, push overall rents higher.
Forbes calls rent control one of the 10 worst economic ideas of the 20th century. And yet, when politicians respond to calls for more affordable housing, they repeatedly turn to rent regulation as a solution. It is an easy, expedient answer that costs governments nothing.
The National Multifamily Housing Council (NMHC) is determined to change that calculus. It has taken up the challenge of educating lawmakers and voters about the damage caused by rent regulation and proposing solutions that address the interrelated crises of housing affordability and supply. NMHC’s view is that the best way to serve the multifamily industry is to pursue measures that benefit the general public: its mission reads in part “to help meet America’s housing needs by creating inclusive and resilient communities where people build their lives.”
We recently met with NMHC President Sharon Wilson Géno to take a deeper dive into the many ways rent control fails the public and to learn about solutions that NMHC believes would be effective in making the nation’s housing more affordable.
Lument: The percentage of U.S. households that spent more than 30 percent of their income on housing has risen steadily over the last 40 years and has now reached 36.9% according to the U.S. Census Bureau. How can we start turning this situation around?
Wilson Géno: The first thing is to recognize that the affordability crisis is largely a question of supply and demand. We simply don’t have the housing we need for the people who live in America today and will live in America in the future. From research we’ve conducted with the National Apartment Association, we estimate that the U.S. must build 4.3 million more apartments by 2035 to close the gap. You can tie some of this shortfall to the aftermath of the 2008 financial crisis, when development declined by about 30 percent, but this situation has been decades in the making.
At NMHC, we advocate a two-pronged approach. First and foremost, we must seek solutions that increase supply at all price points. Second, we will continue to provide subsidies to renters who need support, recognizing that the amount and time the subsidy is required depends on a number of factors, including wages, economic conditions and housing supply. There are many steps that local, state, and federal governments can take to encourage new development of housing and to provide assistance while these new units are being built.
Lument: NMHC has invested a great deal of time in compiling research about rent control. Why go to the trouble?
Wilson Géno: Unfortunately, rent control continues to be embedded in the American political imagination. It’s based on the populist idea that rental housing providers and renters are at odds with each other and that housing providers have all the power in the relationship. Seen in this light, rent control is a way to even the playing field. Because of this false narrative, it’s expedient for politicians who want to demonstrate that they share their constituents’ alarm about the housing crisis to enact rent control legislation as a quick fix to the problem.
The truth is that it has taken a long time to get where we are and it will take time to build the supply we need, but politicians are not always upfront about this basic fact. As long as rent control is seen as a viable solution, there will be little real progress in making housing more affordable for all. It’s an impediment to change.
If we are to change the terms of the discussion, our position on rent control has to rest on a solid foundation of data. We commissioned our first literature review on the effects of rent control in 2018, and we just published an update in 2024. These literature reviews look at all the scholarly research on rent control and summarizes their findings.
Lument: What have you learned in the years since the first report?
The new update builds on the first volume’s analysis of traditional rent control while expanding to include what people call second-generation rent control or rent regulation. Rather than impose a hard and fast cap on rents, these rules take a more flexible approach, for instance linking rent increases to the consumer price index. Studies that have appeared since 2018 suggest that this softer approach produces many of the same impacts as traditional rent control, simply spread over a longer period of time.
The new analyses we’ve included also strengthen and sharpen our view that rent control harms the people it is meant to serve. I’ll give you an example. The first report found that rent regulation forces residents into units that do not best meet their needs, depriving potential residents of units that would be suitable for them. The latest study fleshes out this conclusion. The literature indicates that the benefits of rent regulation accrue disproportionally to higher-income, older, and white residents. In other words, the people who need affordable housing the most—people of low or modest means and those who have been excluded from the rental housing market due to discrimination—are all too often shut out of rent-controlled units.
Lument: But does rent control harm those who succeed in securing a rent-controlled apartment?
Wilson Géno: In some cases, it may mean that they end up living in substandard dwellings. The useful life of a building at any income level is 30-to-40 years. We found that unless rent control laws are carefully crafted to provide incentives for maintenance, landlords are unlikely to make improvements to buildings. Eventually, these units fall into disrepair and are no longer physically or economically viable, thereby reducing the supply of housing. In short, we lose affordable housing just when we need to grow it. Deteriorating regulated apartments affect renters today and make it more difficult for renters in the future to find housing.
Another thing that the 2024 literature review turned up is evidence that rent-control inhibits mobility. There is a strong incentive for residents in rent-controlled apartments to stay put regardless of changes in their lives. Rent control also discourages residents from pursuing better jobs in other areas of the country where more workers may be needed. During COVID, we learned that not all jobs can be done remotely. The federal government is investing billions of dollars in chip factories and other high-tech manufacturing facilities, but people in rent-controlled apartments may be unwilling to migrate to take advantage of opportunities in other areas of the country. And when manufacturers can’t find the workers they need, the whole economy suffers.
Lument: You said earlier that the answer to our affordable housing crisis is additional supply. What effect does rent control have on development and how do those effects cascade through the greater community?
Wilson Géno: Independent scholars have found that rent control laws, in communities where they are enacted, lead to a reduction in the supply of rental housing. Uncontrollable costs like insurance, state and local taxes, and the cost of labor are all going up. To secure a return on their investment, rental housing providers and their investors must make sure that they have the flexibility to respond to these increases. If they can’t, they won’t invest in those communities, again exacerbating the housing shortage.
The diverging fate of housing in Minnesota’s Twin Cities is a textbook case of the effects of rent control on multifamily housing supply and valuation. In 2021, St. Paul imposed a 3% cap on rent increases with no exemption for new construction. New housing development fell off the charts, deals that were supposed to go through stopped dead in their tracks, applications for building permits declined, and rents went up.
That same year, Minneapolis voters passed a charter amendment for the city council to regulate rents on private residential property. Rather than act precipitously, the city council formed a working group to provide recommendations on housing and rent stabilization. The city staff looked at their proposals and concluded that rent stabilization would not effectively address the problem of cost-burdened renters and would actually impede growth of the city’s housing stock. In addition, they determined that tax revenues would suffer because of diminished rental property valuation. The city planning office concluded the best solution was to increase wages for the lowest income households and build more housing. Although the pandemic influenced these figures, Minneapolis in 2022 issued the second-highest number of building permits in 22 years. Rent control efforts in the city are at a standstill. It took political courage to take the long view, but it is paying off for the community.
Lument: NMHC wants to take rent control off the table and advocates for policies that encourage the development of new supply as a way to make apartments more affordable. Can you translate that position into specific recommendations?
Wilson Géno: There’s no one silver bullet for increasing our rental stock, but there is no shortage of initiatives that local, state, and federal government can pursue to expand, accelerate, and diversify the production of new housing. On the federal level, this could include changes in federal tax policy like expanding and enhancing the Low-Income Housing Tax Credit program or providing tax incentives for adaptive reuse of underutilized commercial properties, converting them into multifamily housing. State and local government can provide density bonuses and other incentives for developers to include workforce units in their properties. They can also accelerate approvals, allow by-right development, and adopt more flexible zoning laws.
Lument: It will take time for supply to catch up with demand. In the meantime, how can we assist cost-burdened renters—and those who are entirely priced out of the housing market?
Wilson Géno: We have a good solution already on the books—the Section 8 Housing Choice Voucher program. The voucher program pays the difference between what the resident can pay and the true cost of housing.
However, only one in four people who need housing subsidies gets them. Section 8 has helped millions of Americans find homes in communities near good schools, jobs, and transportation services but it has been plagued with a flawed and inconsistent funding system as well as inefficient and duplicative requirements that have undermined private-sector confidence in the program.
Lument: It seems like NMHC has a lot on its plate. Are you hopeful about the future?
Wilson Géno: I am really excited about the work we’re doing with our partners in the real estate industry. We formed something called the Housing Solutions Coalition, a partnership with the Mortgage Bankers Association, the National Association of Homebuilders, the National Association of Realtors and the National Apartment Association. We all came together to ensure that we are helping our local and state affiliates engage in effective messaging, education, and advocacy to help not just local elected officials, but the voters really understand that rent control undermines the very thing they want, which is more reasonable housing options and more reasonable rents.
I have been heartened by the success many of us have had over the last decade in using data to demonstrate the extent of our housing shortage. There was a period of time when people really weren’t aware of it. I feel like many Americans have now gotten that message, and that’s huge. We are using a similar fact-based approach to educate people about the best way to create the communities we all want to live in. I hope we’ll be similarly successful.
Originally published on MFE.
