“Among the first concepts often taught in traditional economics classes are the notions that the minimum wage tends to reduce employment and that rent regulation tends to reduce housing availability.”
This is how Professor Manuel Pastor begins his discussion on rent control. Historically speaking, economists on both the right and the left have been against minimum wage increases and rent control; however, the clear difference between the two is that, as of the past 15 or so years, economists generally agree that wage increases have little impact on overall employment but rent control remains firmly in the “bad idea” camp.
Pastor’s research, with graduates Vanessa Carter and Maya Abood, takes on the task of questioning the literature against rent control and analyzing if moderate forms of rent control would actually help with the housing crisis, as growing research begins to show that rent stabilization could indeed help.
Within Long Beach, the hopes to have a local initiative ultimately failed (and even worse, speculation that the recent flurry of rent increases were prompted by property owners having to contend with rent control, flooding their bank accounts with extra cash despite the initiative never making it to the ballot). However, given Prop. 10—the ballot initiative facing voters this November which would overturn the Costa-Hawkins Rental Housing Act, a 1995 law that prevents rent control being placed on any units built after that year—the discussion around rent control is becoming heated.
“As in the minimum wage literature, the evidence on the impacts of these more moderate rent regimes is more mixed than older economics textbooks might indicate,” Pastor said. “Evidence suggests there is little negative impact on new construction, which is logical given that newly produced units have no initial rent targets.”
Pastor brings up the many arguments—that at one time, I myself mistakenly argued with—brought up by the anti-rent control lobby: Property owners will stop maintaining their properties, owner move-in evictions will increase, conversion to condos will go up and long-term affordability will be avoided.
However, much of the evidence provided has been either skewed or ignoring social issues like stability within neighborhoods. For example, multiple studies in New Jersey, the most rent-regulated state in the country, have shown that rent control has had little impact on rent levels and availability, contrary to common economic research. But this was because, according to Pastor and his crew, researchers accounted for income levels, the racial makeup of neighborhoods and other related factors.
“Rent regulations, in short, benefit incumbent renters in controlled and maybe even proximate uncontrolled units by promoting housing stability,” Pastor said. “Indeed, the impact of rent regulations on neighborhood stability is one area where there is broad agreement in the literature…. That same Stanford study you used to argue with [linked above] is the same study that found that rent regulations promoted housing stability as beneficiaries of rent stabilization were 10 to 20 percent more likely to stay in their homes long-term.”
While his research does help answer some questions—examples include “Do rent regulations increase the cost of renting non-regulated units?” and “Do rent regulations decrease the property values of apartment buildings for owners?”—Pastor noted that his research is not perfect.
Multiple questions surrounding the implementation of rent control convolute the matter: If only a particular group gains from rent control—those who already have roofs over their heads that they can afford—how are we to improve the lives of other, less fortunate residents? What are the impacts on small landlords, the folks that value the stability of their tenants—these landlords rarely raise rent significantly—but lose from lower potential profits should rent control be implemented?
“These are all important questions,” Pastor said. “While more research remains to be done, the evidence does suggest that the strident debate about rent regulations may be driven more by ideology and self-interest—on all sides—and that public policy would benefit from a more measured discussion.”
In other words, his research suggests that rent regulation is one of many tools to take on the housing crisis directly. In fact, he directly asserts that moderate rent stabilization measures will promote longer stability among residents while slowing displacement caused by gentrification.
“While the housing crisis requires a range of strategies, moderate rent regulation is a useful tool to be nested in broader strategy. It has fewer damaging effects than are often imagined, it can address economic pain, and it can promote housing stability,” Pastor said. “And housing stability matters because it is associated with physical, social and psychological well-being; higher educational achievement by the young; and benefits for people of color.”
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