What Rent Control Protects and What It Doesn’t

After several decades on the defensive, rent regulation has been on the comeback trail in the U.S. lately. In Oregon, the state Legislature and governor approved a new law early this year that limits rent increases to 7% a year plus inflation. In California, the state Assembly passed a similar cap in May that’s currently in committee in the state Senate, and local rent-control measures have been popping up on ballots for several years now and sometimes passing.4 In New York, which has the country’s best-known and most extensive system of rent regulation (with allowed annual rent increases of much less than 7% plus inflation), the state Legislature and governor this month enacted a set of changes that will, among other things, put an end to thousands of New York City apartments leaving rent regulation every year when they become vacant.

Proponents of rent regulation say it protects tenants in expensive markets, keeping families and senior citizens in their homes and preserving neighborhoods from rapid change. Opponents argue that such laws do nothing to increase the supply of affordable housing and sometimes decrease it, while leading to declines in housing quality. Interestingly, both sides appear to be right: Empirical studies examining a major expansion of rent control in San Francisco in 1994 and its abrupt removal a year later in Boston and Cambridge, Massachusetts, found that removing controls led to higher rents on previously controlled apartments but also increased investment in housing quality and supply, while adding new controls conferred benefits to the affected tenants and caused them to stay in their apartments longer but reduced the overall supply of rental housing, thus driving up rents on unregulated units.