The Impacts of Rent Control
WMFHA has joined Partnership for Affordable Housing, a 501(c)4 nonprofit, formed out of a strong and shared interest to come together to provide effective solutions to housing affordability in Washington.
The statewide coalition made up of community organizations, housing providers, and members of organized labor promotes solutions. Formed amidst a housing crisis that was acute prior to the COVID-19 outbreak, the coalition will be even more critical in the future.
The coalition takes a proactive approach to address housing affordability and is focused on the following principals:
- Support the creation of all types of housing that meets the needs of every Washington resident
- Enact new policies that help residents to stay in quality, affordable housing for the near and long term
- Give local communities more tools to keep housing affordable
Combatting housing affordability issues will require solutions that address the needs of all Washington residents. Examples include:
- Provide rental assistance for residents in need: A community fund that helps residents remain in their homes in both short and long-term instances.
- Create a multifamily tax aid: Property tax exemptions for housing providers who keep rents below market rates to maintain quality, affordable housing.
- Build public/private partnerships: Partnerships between government and the private sector that create a range of housing that fits needs of more people.
- Increase and expand the Washington Housing Trust Fund: State created program to fund affordable housing projects through a competitive process.
- Support Local Housing Levies: Jurisdictional programs that develop and preserve affordable housing and/or provide direct assistance to families at immediate risk of eviction and homelessness.
Rent control, rent caps, and other policies where the government controls the rental rates charged to residents lead to less affordable housing and fewer homes created.
The economic fallout from COVID-19 has been staggering. Stay-at-home orders have disrupted commerce and pushed many Washingtonians into unemployment. These changes have led to housing insecurity for many in a state that was already in the middle of a housing crisis.
Despite federal, state, and local responses that expanded unemployment benefits and business funding programs to support those impacted, further action by decision-makers will certainly be necessary.
In a recently released comprehensive research study published by economic consulting firm ECONorthwest on behalf of Partnership for Affordable Housing, available at www.partnershipforaffordablehousing.com, it is clear that a statewide rent control policy is the wrong solution.
Rent Control Would Slash Housing Creation
According to the research report, a statewide cap on rents would reduce housing creation in Washington by 15,000 homes over the next 10 years. The impact would be felt greatest where housing is needed most; 78% of the lost homes would be located in King, Pierce, and Snohomish Counties.
Washington’s population has grown by 12 percent over the last decade. However, between 2000 and 2015, we underproduced 225,000 homes – everything from apartments to ADUs to single family houses.
For every three jobs created in King County, we only created one new home. Looking ahead, Washington needs to create about 10,000 new apartments every year by 2030 just to keep up with demand for rental housing. Rent control would take us even further away from the 10,000 apartment home goal and would make our housing affordability challenges worse.
The report also considers places like New York, California, and Washington, D.C. All have rent control, yet they are among the most expensive places to live in the United States. Part of the reason is that rent control reduces the creation of new housing, further exacerbating the housing crunch. Nearly all economists agree rent control doesn’t help housing supply.
The vast majority of New York’s rent-stabilized apartments are in buildings well over 70 years old and in constant need of maintenance, repairs, and upgrades. Yet housing providers are limited by rent control and unable to pay for the cost of these repairs.
Take Effective Action to Help Address the Housing Crisis
Now, more than ever, we must rally around solutions that help residents remain in their homes while supporting the creation of new housing that meets the needs of people from all income levels. Emergency rental assistance funds like those proposed in the HEROES Act are vital to helping people remain in their homes during the COVID-19 crisis.
This legislative session, the state should look at increases to the Washington Housing Trust Fund to expand investment in affordable housing opportunities. We can redouble our commitment to affordable housing by building on last year’s sales tax rebate for cities that invest it in housing creation. The state can help increase the creation of a wide range of housing with property tax incentives for housing providers that keep rents below the market rate.
We need to apply a holistic approach that begins to chip away at our affordability crisis. All the while, legislators must refuse to fall for easy "quick fixes” that could ultimately make Washington’s housing crisis and response to the pandemic even worse.
Adverse Impacts of Rent Control
The report makes clear: as decision-makers consider short- and long-term solutions to the economic fallout from COVID-19 and Washington’s existing housing crisis, that a statewide rent control policy is not the solution. Here’s why:
- Rent control would slash housing creation. A statewide cap on rents would reduce housing creation in Washington by 15,000 homes over the next 10 years. This is equivalent to 11% of all the multifamily units produced statewide between 2010-2019. A reduction of 11% in housing creation is equal to a year’s worth of homes that would never be built in the next decade.
- Rent control could reduce property tax revenue. Washington tax policy is heavily reliant on housing investments. Rent control could reduce property tax revenues by $200 million over 10 years and reduce sales tax revenue by $301 million.
- Rent control would reduce economic activity and jobs. Rent control would significantly reduce housing investments to the tune of $3.5 billion over 10 years. This would also reduce employment in the skilled construction trades and other professional services.
- Rent control is failing elsewhere. San Francisco, New York, and Washington, D.C. all enacted rent control and are among the most expensive cities in the United States. Part of the reason is that rent control reduces the creation of new housing, further exacerbating the housing crunch.
“Fixes” like rent control would ultimately make Washington’s housing crisis and response to the pandemic even worse. That kind of policymaking takes us backward and exacerbates the housing crisis for everyone.
The state can spur housing creation that meets the needs of all people of all income levels and help families remain in their homes by creating a fund for short term rental assistance. At the same time, we must avoid bad public policies like rent control that reduce housing creation and increase housing costs for all.