Recently North Carolina state Senator Lisa Grafstein (Democrat – Senate District 13), submitted Bill 255, Act to Permit Local Governments to Enact Rent Control. Bill 255, if enacted, will repeal Statute 42-14-1 Rent Control, and allow municipalities to enact any form of rent control.
Statute 42-14-1 prohibits North Carolina jurisdictions from implementing rules that interfere with the rental of private property:
No county or city as defined by G.S. 160A‑1 may enact, maintain, or enforce any ordinance or resolution which regulates the amount of rent to be charged for privately owned, single‑family or multiple unit residential or commercial rental property.
Senator Grafstein’s reason for introducing this bill is the usual one: rising rental costs are causing financial hardships. Indeed, that is the case, especially since the start of the Covid-19 pandemic in 2019. Rent control is the easiest way to show constituents a representative is “doing something.”
Rent control is also an inefficient way to address housing costs.
Unfortunately, rent control is also plagued with consequences and uneven results. Renters under rent control love their housing cost stability. Lower-income workers with hopes of stable housing costs support rent control. On the other side of the coin, landlords who are unable to pass their rising costs to tenants due to rent control seek solutions detrimental to tenants: poor property maintenance, raising rents on units not under control (thus raising overall rental costs), or withdrawal from the controlled market.
Given rent control’s uneven consequences, opinions on it vary widely. Here are two seemingly heart-felt quotes.
…our family was always able to afford a roof over our heads, because we were living in a rent-controlled building. That most minimal form of economic security was crucial for our family. Senator Bernie Sanders, CNN Opinion, July 30, 1919.
In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing. Assar Lindbeck, The Political Economy of the New Left, 1972.
While lower-income residents, especially those in more progressive cities, support rent control in hopes of stabilizing their housing costs, economists generally agree controls are destructive. Here is a good summary of the challenges economists see in rent control. The author is economist John Phelan in his essay 81% of economists agree that rent controls are bad policy, Center of the American Experiment, December 18, 2018.
… there are, in fact, areas where the economists’ cacophony dies down and they speak with more or less one voice.
One such area is rent control. This proposal – to cap the price landlords can charge tenants – crops up perennially as a solution to high rents. This is mistaking the symptom for the illness. When prices are high they are sending you information. They are telling you that demand is high relative to supply. If you want to do something about this, act to either reduce demand or increase supply. Either way, trying to fiddle with the signal makes no more sense then trying to slow down your car by breaking the speedometer.
But fiddling with the signal is expedient if not effective.
Decreasing demand for housing or increasing supply are solutions to high rents more complex than implementing rent control. Decreasing demand requires decreasing population growth, a solution not embraced by governors or legislators. Increasing supply (and growth) sounds good to state leaders, but their efforts are very often met with public outcry from residents rejecting loss of open spaces, increased traffic, and change in neighborhood character.
Thus, legislators sometimes opt for rent control – even though rent control seldom works as intended.
At present, two states, California and Oregon, plus the District of Columbia have state-wide rent control ordinances. Seven states allow local rent control: California, New York, New Jersey, Maryland, Maine, Oregon, and Minnesota. California, New York and New Jersey have the highest rents in the nation.
Most certainly Senator Linda Grafstein is aware of challenges inherent in both rising rents and rent control. Hopefully, so are her constituents.
Pictured: From widely circulated videos of protesters in Charlotte, NC, on January 25, 2023. Protesters were demanding accountability from corporate landlords; specifically, a stop to the growing ownership of homes by corporate landlords, improved building maintenance, and a 3% cap on rents.