from Liberty Unyielding
Legislation to allow rent control ordinances has passed a committee in Virginia’s House of Delegates. On a party-line, 11-to-9 vote. The Committee on Counties, Cities and Towns passed HB 721, which defines rent gouging to include raising rent to keep up with inflation, if inflation exceeds 7 percent.
This vote reflects the leftward movement of the Democratic Party. Rent control has historically been prohibited not merely in Republican states, but even in many Democratic states. Massachusetts, for example, banned rent control in a 1994 referendum, even as it was electing Democrats to nearly fourth-fifths of the seats in its state legislature, and even as it elected Democrats to eight of its ten seats in the U.S. House of Representatives. When Georgia still had a Democratic-controlled legislature and a Democratic governor, it banned rent control in 1984.
Yet, all Democrats on the committee voted for HB 721.
The legislation states that once a local government has adopted “anti-rent gouging provisions,” it “shall prohibit any rent increase … of more than the locality’s annual anti-rent gouging allowance,” defined as the “percentage increase in the Consumer Price Index...or seven percent, whichever is less.” So if inflation is 9% — as it was from March 2021 to March 2022 — the landlord can only raise rent by 7%, at most. And the landlord might not be allowed any inflation adjustment at all, because under the legislation, a local government “may” — not must — “allow rent increases” to compensate for inflation.
So landlords will become poorer and poorer due to inflation under these “anti-rent gouging” ordinances.
This is a harsh form of rent control. Raising rent to keep up with inflation isn’t what most people would consider “rent gouging,” even when the landlord has to increase rent by more than 7%. For example, Washington, D.C.’s rent control board allowed landlords to raise rents on most tenants 8.9% in 2023, to compensate for 6.9% in inflation.
It is not clear why Virginia legislators believe rent should rise more slowly than inflation, when wages have generally risen faster than inflation over the last ten years, and some tenants (like social security recipients) get cost-of-living adjustments by law to keep up with inflation.
Economists oppose rent control because it makes it more difficult for people to find decent housing in the long run. In a 1992 poll, 93 percent of them said 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.”
Even progressive economists mostly think rent control is a bad idea. The Swedish economics professor Assar Lindbeck, a Social Democrat, said, “rent control appears to be the most efficient technique presently known to destroy a city—except for bombing.” Similarly, the liberal Washington Post explains, “Rent-control laws can be good for some privileged beneficiaries, who are often not the people who really need help. But they are bad for many others.” For example, after San Francisco imposed rent control, “landlords responded by converting their buildings into condos they could sell or business properties they could lease without rent-control restrictions — or by demolishing their old buildings and replacing them with new ones” not subject to rent control. Moreover, “landlords have less incentive to maintain their properties in a rent-controlled environment,” reducing housing quality. “And since rent-stabilization policies often tend to discourage people from moving, they harm worker mobility and the economic dynamism associated with it.” These observations were made by the progressive-leaning editorial board of The Washington Post, which has not endorsed a Republican for president since 1952.
Rent control also reduces the quality of housing over time. 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 investments 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.
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.
This Virginia rent-control legislation goes next to the House Courts of Justice Committee.
Republished with permission from Liberty Unyielding.
