by Hans Bader
A just-introduced Virginia bill, HB 192, would limit rent increases to “one percent over the Consumer Price Index” in places where the rental vacancy rate is “less than 10 percent,” if the “Consumer Price Index … is greater than five percent.” Virginia has a rental vacancy rate of about 4%, well below 10%, so effectively, this would be a statewide rent control law.
The bill does not allow larger rent increases even to pay for things like major capital improvements.
The bill, introduced by Democratic Del. Marty Martinez, is called the “Landlord and Tenant Fairness Act.” It contains this rent-control provision:
C. If the rental vacancy rate for a locality is less than 10 percent during the previous calendar year and the Consumer Price Index as reported by the Bureau of Labor Statistics of the U.S. Department of Labor is greater than five percent, any rent increase imposed by a landlord shall be no greater than one percent over the Consumer Price Index.
In 2023, legislation to allow cities and counties to impose rent control was introduced by five Democratic delegates, but it had no Republican support and thus died in a committee of the Republican-controlled House of Delegates on a party-line vote. In the November election, Democrats took control of the House of Delegates, so it could pass the House of Delegates.
But its chances of passing the state Senate are probably lower. Legislation to allow localities to adopt rent control failed to advance in a committee of the Democratic-controlled Senate in 2023. A ranking progressive member of the committee, who is now its chair, worried “that the proposal could keep landlords from paying for maintenance needs or changes. I’m sympathetic, I have a lot of constituents, including some who spoke about the high cost of housing, and I’ve got a lot rental housing in my district,” Sen. [Adam] Ebbin said “… but I’m wondering if we’re going to limit them to consumer price index, if you have a apartment complex, particularly a large one that needs some kind of major renovations or wants to upgrade, that you’re really kind of handcuffing them.”
This is a concern that has historically been shared even by liberal economists. As the liberal Brookings Institution notes, “Rent control can also lead to decay of the rental housing stock; landlords may not invest in maintenance because they can’t recoup these investment by raising rents.”
When landlords can’t raise rents to pay for repairs and renovations, they may let apartment buildings decay. After New York limited rent increases to pay for major capital improvements to 2 percent, landlords cut back on such improvements. A survey of rent-stabilized landlords found that when rent increases were curbed,
Three out of four reported cutting back on essential building-wide repairs, such as a roof or boiler replacement, since the rent law passed. Nearly 90 percent said they had forgone kitchen or bathroom renovations. Just over half decided against revamping their buildings’ security systems to include cameras or video intercoms or adding storage lockers for deliveries to thwart porch pirates. Efficiency upgrades have also been pushed to the back burner. Over 40 percent of respondents said they would not replace lighting with LED fixtures that use 90 percent less energy — a budget saver for tenants. A quarter said they opted against installing fuel computers, which better regulate heat and hot water systems and reduce a building’s energy consumption.
Almost all economists think rent control is a bad idea: In a 1992 poll, 93 percent of them agreed that rent control reduces the quantity and quality of housing available. As The Wall Street Journal observes, “If there’s any consensus in economics, it’s that rent control achieves the opposite of its intended goal. It leads to housing shortages by discouraging new development and maintenance of existing properties.” Reason Magazine says that “rent control has a history of constricting the supply of rental housing and reducing housing quality.”
Rent control reduces the value of housing stock, shrinking the property tax revenue that funds schools and local governments. “Researchers at the University of Southern California said rent control hurt property values in St. Paul, Minn. by $1.6 billion,” reported Market Watch.
Once limited to places like New York City, rent control is now spreading to more areas, reducing housing construction there. In July 2023, Maryland’s most populous county, Montgomery County, imposed rent control. Some housing projects stopped as a result. Montgomery Perspective reported that a “Montgomery County-based developer has written the county executive and the county council with news: their company is stopping a county project because of the pending passage of rent control. And they are not alone as at least six other developers are stopping further projects here and shifting resources to other areas including Northern Virginia.”
Hans Bader practices law in Washington, D. C. Republished with permission from Liberty Unyielding.
