Movement to resurrect rent control gains steam as rents increase

Market Trend

Movement to resurrect rent control gains steam as rents increase

Driven in part by rent helping to drive up inflation, lawmakers in states and cities nationwide have revived long-dormant rent-control policies in recent years, according to a new report published by the Wall Street Journal.

Policymakers are pointing out that wages aren’t keeping up with the rising cost of rent, which climbed 11 percent — a rate that was three times faster than a normal year — in 2021.

The response in cities large and small,has been to revive policies that seek to slow the rate of rent hikes. In all, more than a dozen states are currently tackling rent control in their legislative agendas, according to the Journal.

“Rents are exploding at a pace far faster than income,” Stijn Van Nieuwerburgh, an economist and professor at Columbia Business School who researches rent control, told WSJ. “The problem is now as bad as it has ever been. And probably much worse.”

California and Oregon have enacted statewide rent-control laws. Legislators are hoping to overturn bans in Florida. Voters have approved measures in Midwest cities. Members of Congress have floated the concept at a national level. And property owners across the country have fought against efforts, they say.

But a confluence of rising inflation, higher rent prices and wages that haven’t kept pace has led to a resurgence of restrictions on property owners and the cost of rent.

In St. Paul, Minnesota, rental properties will be subject to a maximum rent increase of 3 percent annually under the voter-approved rent-control ordinance.

The ordinance is only the latest effort in the Midwestern city to slow the price growth on rentals in St. Paul, where half of all residents are renters and a quarter are rent-burdened, according to the city.

While previous rent-control measures were feared to have stunted the creation of new housing, city staff is considering exempting newly constructed properties from the ordinance.

Still, the Wall Street Journal reported that developers have paused nearly a third of their planned projects due to concerns over the ordinance.

Oregon’s rent-control law restricts rent hikes to the consumer price index plus no more than 7 percent. The CPI has been rising at a rate faster than any point over the past 40 years. Prices rose 7 percent in 2021, meaning rent in Oregon could be increased by no more than 14 percent.

California’s law also restricts rent hikes to a certain amount plus inflation, but it puts a maximum hike at no more than 10 percent annually.

About three-dozen states have restrictions on rent-control, according to the National Apartment Association, some of them put in place after efforts for rent control in the 1970s.

That isn’t stopping officials in cities like Miami from studying ways they could work around state pre-emptions on rent control amid big jumps in housing costs.

A committee focused on housing in Miami-Dade County voted 3-2 last week to begin looking at whether the city faces a “housing emergency.” If the full commission agrees when it meets next month, the city could move to pass a law implementing rent control in the Sunshine State.

Jul 11, 2022 Market Trend