Rent Control Limits Cities' Housing, Economies
Recent findings by the National Apartment Association (NAA) reveal rent control’s potential effects on four major U.S. cities. NAA’s analysis shows that these policies decrease the housing supply, harm the condition of existing housing stock and lower property values, which leads to lower tax revenues. These policies ultimately limit job growth and negatively affect local economies.
“Putting a cap on rents leads to a host of unfavorable and unintended consequences,” said NAA President & CEO Robert Pinnegar, CAE. “Investment in new construction dries up while maintenance and repair spending drop significantly. Because of this, fewer new units are built, fewer jobs are created and tax revenues decrease, which in turn harms important tax-funded services like schools and public safety.”
As rent control policies continue to gain traction throughout the country, the research, conducted by Capital Policy Analytics, specifically examined the effect of imposing a 7 percent growth cap in Chicago, Denver, Portland and Seattle. The study found that both Seattle and Denver would face greater housing supply shortfalls as developers build other property types or move to different markets. Rent control leads to significant drops in city revenue, harming local economies and jeopardizing funding for critical public services. Seattle would face a $655.6M loss in property values, which would cut projected property tax revenues by $5.5M every year. Sales tax revenue would equate to a $51M loss. Chicago properties would lose $488M in values. Denver would have a $462.2M loss in property values. Portland’s property values will drop $213.9M.
“Many localities view rent control as an easy solution,” Pinnegar said. “However, rent control ultimately harms the individuals that it intends to help – because anyone can qualify for a rent-controlled apartment, these artificial caps don’t always help the citizens who truly need help. The housing affordability crisis didn’t occur overnight, and unfortunately, there is no silver bullet fix. It will take contributions from everyone to begin fixing the problem.”
With nearly 39 million Americans calling apartments home, it is more critical than ever to leverage sustainable and sensible solutions to our nation’s housing supply shortage. NAA’s latest findings, combined with 40 years of research demonstrating the failure of rent control policies, underscores the importance of lawmakers instead of looking at real solutions that provide tangible benefits. Sustainable solutions, such as lifting barriers to construction, allow the industry to build the 328,000 new apartments, at all price points, that we need annually to meet the current demand.