Rent Control Coming to Oregon

Oregon is expected to enact rent control in the near future.

Is this a good idea? A consensus of economists is that it is a bad idea.

Liberal and conservative economists both conclude that rent control is bad economics. In a 1992 survey the American Economic Association found 93% of economists agreed that a “ceiling on rents reduces the quantity and quality of housing available.” [1]

Prominent liberal economist Paul Krugman stated in a New York Time op-ed piece that “rent control is among the best-understood issues in all of economics, and—among economists, anyway—one of the least controversial.” [2] Least controversial because the undesirable side effects of rent control are “immediately obvious” to “an economist, or for that matter a freshman who has taken Economics 101.” [3]

Rent controls exacerbate shortages of affordable housing. Rent controls push landlords to convert properties to non-rental uses, such as condominiums.

After rent control was enacted in Boston in the 1970s, about “10 percent of the city’s rent-controlled housing stock was converted to condominiums and moved out from under the grasp of the ordinance.” [4]  After rent control was reversed in the 1980s, the trend away from renting units out also reversed itself. After rent control ended there was “a 6 percentage point increase in the probability of a unit being a rental” as opposed to a condominium, or other use. [5]

Rent controls discourage landlords from investing in upkeep. With rent arbitrarily capped, landlords have less means and less incentive to maintain units. Landlords are only legally obligated to provide housing that is fit for human habitation. They are not obligated beyond that low threshold.

“Though rent control does not seem to lead to catastrophic maintenance failures, it appears to reduce the maintenance performed on rental units. As landlords can be fined for allowing water and heat failures, but not for cracked paint, this result is not surprising.” [6]

Rent controls lower property values of rental properties, often leading government to make up lost revenue by raising taxes on everyone else. The “tax burden is shifted not only to single family homeowners, but also to tenants in the uncontrolled market.” [7]

Policies that increase housing supply, rather than shrink it, might be better policy.

Minneapolis, for instance, has done away with single-family zoning, opening up development of apartments and condominiums.

 

 

 

[1] Alston, Richard M.; Kearl, J. R.; Vaughan, Michael B. (1 May 1992). “Is There a Consensus Among Economists in the 1990’s?”

[2] Reckonings; A Rent Affair, Paul Krugman, New York Times, June 7, 2000.

[3] Reckonings; A Rent Affair, Paul Krugman, New York Times, June 7, 2000.

[4] Navarro, Peter. 1985. Rent Control in Cambridge, Massachusetts. Public Interest 78(4): 83- 100.

[5] Sims, David P. 2007. Out of Control: What Can We Learn from the End of Massachusetts Rent Control? Journal of Urban Economics 61(1): 129-51.

[6] Sims, David P. 2007. Out of Control: What Can We Learn from the End of Massachusetts Rent Control? Journal of Urban Economics 61(1): 129-51.

[7] Navarro 1985, 96.

Posted in Oregon Landlord Tenant Law and tagged , .

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