Rent Control Is Up for a Vote This Year. Its Effects Aren't.

Voters in Orange County, Florida, and Pasadena, California, will vote on ballot initiatives that cap rent increases at, or below, inflation.

The high inflation of the 1970s spurred jurisdictions across the country to adopt rent control. The 2020s' high inflation might end up doing the same thing.

Come Tuesday, voters in a handful of communities across the country will vote on ballot initiatives that cap rent increases or tighten existing caps.

Activists argue the policy is necessary to stem post-pandemic skyrocketing rent and housing costs. History suggests these measures, if passed, will come with a long list of unintended consequences.

The most sweeping rent control initiative up for a vote next Tuesday is Measure H in Pasadena, California. It would cap rent increases at 75 percent of inflation as measured by the Consumer Price Index (CPI), impose a raft of new limits on evictions, and require landlords to pay tenants' relocation expenses should they want to move into their property or take it off the rental market.

That effectively requires real rents to fall each year. Measure H is far stricter than California's 2019 rent control law that limits annual rent hikes to 5 percent plus inflation (capped at a maximum 10 percent annual rent hike). State law generally exempts single-family homes and apartments less than 15 years old from rent control and forbids localities from imposing rent control on housing built after 1995.

Landlords predictably oppose Measure H, citing the strictness of the rent caps, the costs of enforcement, and the poorly targeted nature of rent control generally.

"Measure H is the least effective way to ease the cost of housing, particularly for our lower and middle-income households," said Matt Buck of the California Apartment Association, which represents landlords. "There are no assurances that rent control helps the lowest-income renters and those who need rental housing the most."

The measure was put on the ballot by a coalition led by the Pasadena Tenants Union. It's got support from the local YIMBY (yes in my backyard) group Abundant Housing L.A.

"Rent stabilization is an important tool to protect renters from being forced to leave their long-time homes solely because their landlord wants to raise the rent," said Abundant Housing L.A. executive director Leonora Camner in a statement to Pasadena Now. "The smart design of Measure H minimizes the risk of negative consequences for renters and the housing market overall."

A handful of other California cities have ballot initiatives that would tighten pre-existing rent caps, reports the Associated Press.

History suggests that rent control has a good chance of passing in Pasadena. The preamble to Measure H notes that 54 percent of Pasadena voters supported a 2018 state rent control ballot measure that received approval from only 40 percent of statewide voters.

A more modest measure in Orange County, Florida, (which includes Orlando) might face a tougher path to victory, both legally and electorally.

That measure would limit rent increases to inflation, as measured by CPI. Landlords who increase rent by more than that could be sued by their tenants and hit with fines of up to $15,000.

Florida has much tighter state-level restrictions on rent control than California. City councils and county commissions must pass a rent control ordinance before putting it on the ballot. The policy must also sunset after a year. The local government must also declare a housing emergency "so grave as to constitute a serious menace to the general public and that such controls are necessary and proper to eliminate such grave housing emergency."

That last requirement could be the measure's undoing, even if it does pass.

A coalition of state trade associations representing landlords and realtors sued to get the measure off the ballot, arguing that the Orange County Commission had failed to establish such a grave emergency when it voted to place the initiative on the ballot.

Last week, the Associated Press reports, a Florida appeals court sided with property owners in ruling that the county had failed to establish a housing emergency exists and therefore rent control couldn't go into effect.

The county is trying to get a new hearing on its measure. Orange County election officials also say they're not going to print new ballots, so voters will still have the opportunity to check the box for rent control at least. Should the courts reverse themselves, there's still a chance rent control will come to Orange County.

The rent spikes that rent control supporters are responding to are real and painful. In a place like Pasadena especially, rent was already unaffordable high for many working people.

That doesn't make rent control a good idea.

Limiting the returns on rental housing reduces its supply. Landlords either convert existing units to owner-occupied condominiums or developers decline to build new units. When rents can't keep pace with rising costs, landlords start to cut back on maintenance. That reduces unit quality.

St. Paul, Minnesota, got a lesson to this effect when voters passed a 3 percent rent cap with no allowances for inflation, vacancies, or new construction in last year's municipal elections. Developers responded by walking away from in-progress projects totaling thousands of units. The city has since softened its cap.

Pasadena's rent control measure doesn't affect post-1995 units so it won't disincentivize new construction. But the harsher caps will likely see more rental property owners convert their units to condos. A landmark study of rent control expansion in San Francisco found that the policy prevented the displacement of tenants but also sped condo conversions.

The allowable rent increases of Pasadena and Orange County's measures will also likely see landlords reduce maintenance given that they, too, are experiencing the strain of high inflation.

Given enough time, reduced unit quality can also reduce supply.

New York City has kept rent increases on rent-stabilized units below inflation for years. A 2019 state law also limited the ability of landlords to pass on maintenance and capital improvement costs to tenants. The result, according to a study from one landlord association, is that many rent-stabilized units are being "defunded" to the point of being uninhabitable.

It's easy to see why rent control is an attractive solution to rising rents. The costs of the policy vastly outweigh its purported benefits. That's not going to change this election cycle.