Rent Control
Rent Control is a price ceiling enacted by policymakers that prevents landlords from imposing excessive rent on tenants. Rent Control began as a temporary measure enacted in the 1940s following World War II, (Mills, R, p. 68). Despite the cessation of the federal program post-war, New York City has continued its own practice of rent regulation. The modern framework of rent control policy must consider “jurisdictional limits, methods for calculating maximum rent, exempt properties, eviction restrictions, and penalties and enforcement” per county or municipality, (CGA).
The Urban Institute Metropolitan Housing and Communities Policy Center notes that “more than 200 municipalities have enacted some form of rent regulation,” while “the majority of the states” ban rent control laws, (Urban). The general consensus among the majority of state governments imposing rent control is unfavorable. Conversely, the Urban Institute contends that rent control provides a mutual “balance [of] power between renters and landlords,” (Urban).
But rent control is a form of price fixing. Black’s Dictionary defines the term Price Fixing as [t]he artificial setting or maintenance of prices at a certain level, contrary to the workings of a free market,” (Garner, B., p. 1440). The Heritage Foundation’s Index of Economic Freedom 2024 data places North Korea, Cuba, and Venezula in the bottom three worst nations out of 184 of the 195 recognized countries; while the United States scored 25th, (Heritage).
The New York Office of Rent Administration’s Homes and Community Renewal (HCR), reports that “[r]ent control is the older of the two systems of rent regulation,” (HRC). The New York Office of Rent Administration defines the second system Rent Stabilization to “[provide] protections to tenants besides limitations on the amount of rent increases,” (HRC). The New York City Rent Guidelines Board specifies that “[w]hile rent control and rent stabilization both involve rent regulation, they have different sets of regulations,” (RentGuidelinesBoard). The 2023 NYC Housing and Vacancy Survey (HVS) data noted “about 24,020 rent controlled apartments and about 960,600 rent stabilized apartments,” (RentGuidelinesBoard). Thus, “[t]he term ‘rent regulated’ encompasses both rent controlled and rent stabilized units,” (RentGuidelinesBoard). Maryland, New Jersey, and New York and the District of Columbia legislate bills “that expressly authorize rent control,” (CGA). Data from these states can be compared to the rest of America to weigh the impact its enaction presents.
The Heritage Foundation warns “[e]normous policy challenges undermine long-term U.S. economic competitiveness;” adducing that rent regulation and other “[b]ig-government policies have eroded limits on government, public spending continues to rise, and the regulatory burden on business has increased,” (Heritage). The Heritage Foundation notes that a solution to “[r]estoring the U.S. economy to ‘free’ status will require significant changes to reduce the size and scope of government,” (Heritage). Black’s Law Editor Bryan Garner adds that Price Fixing is “an agreement between producers and sellers of a product to set prices at a high level,” noting that price fixing “is usu. illegal per se under antitrust law,” (Garner, B., p. 1440). Specifically, Horizontal Price Fixing places “[p]rice-fixing among competitors at the same level, such as retailers throughout an industry,” (Garner, B., p. 1440). But price ceilings cause shortages and distort the allocation of resources.
Rent control disincentivizes property owners, including landlords from owning multiple properties—if any; and it discourages tenants from purchasing property, due to the prospect of perpetually stabilized rent compared to the variance of the housing market. The landlord’s income is reduced, effecting regular maintenance and upgrade of units and their facilities. This circumstance forces landlords to either cut costs or risk personally funding the maintenance. The natural law of supply and demand means that with fewer available units, there will be more competition for tenancy; namely, “this phenomenon of non-mobility came to be known as housing gridlock,” (Miller, R.,p. 69). Neglecting the market value of rental units fails to account for the cost of maintaining the units. Moreover, it forces landlords to persistently raise every tenants’ rent annually by the maximum allowed amount to account for these costs. In New York City, “the Rent Guidelines Board is made up of nine members, all appointed by the mayor, who vote on yearly rent increases,” (Urban). The New York City Homes and Community Renewal (HCR) adds that “various Rent Guidelines Boards each set rates for rent increases in rent stabilized apartments in their respective municipalities,” (HCR).
By renting apartments at market value, maintenance and labor can be factored into the overall cost of the commodity. Regular maintenance produces a better living environment for the tenants, thus justifying the value of the resource. Further, free market values ensure that landlords needn’t pay out-of-pocket for imminent repairs and regular maintenance naturally incurred by the tenants’ occupancy of the facilities. The Free Market is self-regulating in that by its natural law it cannot usurp authority from any party; yet it offers an objective basis of reference.
The New York City Homes and Community Renewal (HCR) reports that “[u]nder rent control law, tenants are not obligated to sign renewal leases, as these tenancies are statutory. Rent increases are limited, and services and evictions are regulated,” (HCR). Roger Miller highlights that rent control “discourages the construction of new rental units . . . leads to the deterioration of the existing supply of rental housing . . .[thus] impedes the process of rationing scarce housing,” (Miller, R., pp. 68, 69). Worse, rent control laws are “cumbersome and expensive, leading to the expansion of bureaucracies to administer them,” (Miller, R., p. 70). This leaves the housing market centralized by government administration, placing landlords under its jurisdiction for rent control. In New York City “the only rental units being built are either exempt from [rent] controls or heavily subsidized from the government;” whereas Dallas built in one year “11,000 new housing units” without imposing rent regulation, (Miller, R., p. 69). In the Old Testament the prophet Amos scribed that “[t]herefore because you impose heavy rent on the poor And exact a tribute of grain from them, Though you have built houses of well-hewn stone, Yet you will not live in them,” Amos 5:11a (NASB). The Old Testament Prophet Amos noted God finds it unfavorable to “impose heavy rent.” While rent regulation physically prohibits any landlord from exploiting their tenants by force; Christianity is voluntary, therefore every believer’s faith cannot be forced—nor can his personal relationship with God. Any man forced to be righteous often “lead to efforts by both landlords and tenants to evade the rules,” (Miller,R., p. 70). Government needn’t regulate the maximum price of rental property nor hold authoritative oversight over God’s free market. Similarly, the Prophet Jeremiah prophesied “For this is what the LORD of Heaven’s Armies, the God of Israel, says: ‘Someday people will again own property here in this land and will buy and sell houses and vineyards and fields,’” (Jeremiah 32:15; NLT).
Miller notes that “[i]n New York City . . . [t]he city has made evictions “extremely costly for landlords;” moreover any tenant can correct their violation before eviction, (Miller, R., p. 70). The National Multifamily Housing Council’s archive reveals that 31 states “prohibit localities from adopting rent control ordinances,” (CGA). The Connecticut General Assembly’s (CGA) Office of Legislative Research writes “[c]urrently, only two states (California and Oregon) have enacted statewide rent control laws and three states . . . have laws authorizing local governments to adopt rent control ordinances. Additionally, in the District of Columbia, districtwide rent control is in place pursuant to a Congressional act,” (CGA).
Under rent regulation, landlords are often unable to maintain their apartments, surrendering the property to the state. In just five years, “[b]etween 1988 and 1993, New York City spent $5.1 billion rehabilitating housing confiscated from private landlords,” (Miller R., p. 70). This reduces the amount of available private property owners available, centralizing the market, forming a housing cartel. The Oxford Dictionary of Law defines the term Cartel as “a national or international association of independent enterprises formed to create a monopoly in a given industry,” (Law, J., p. 654). Cartels typically agree on “prices; output levels; discounts; credit terms; which customers they will supply; which areas they will supply; and . . . bid rigging,” (Law, J., p. 79).
Conclusion
In sum, rent control and rent stabilization disbalance the free market’s self-regulation and disincentivize property owners; while negating the costs of maintenance, updates, and expansion. This reduces the quality and quantity of the available units, causing shortages. Rent regulation facilitates, (1) neglect of property obligations (no matter the cause); (2) the accumulated natural wear and tear of each unit from occupancy of the tenant; (3) annual increases in rent of the maximum amount (4) financial decisions made by bureaucracy; and (5) the rejection of free market justification. This decreases the morale of existing tenants and produces scarcity of any viable alternatives for tenancy. Thus, Roger Miller’s argument is more persuasive; in cogence with natural law, and concurrence in favorability for both property owners and tenants.
Bibliography
CGA. (Accessed on November 11th, 2024). States With Rent Control. Connecticut General Assembly’s (CGA) Office of Legislative Research. https://cga.ct.gov/2021/rpt/pdf/2021-R-0211.pdf
HCR. (Accessed on November 7th, 2024). Rent Stabilization and Rent Control. New York State Office of Rent Administration: Homes and Community Renewal. https://hcr.ny.gov/system/files/documents/2024/01/fact-sheet-01-01-2024_0.pdf
Garner, B.A. (2021). Black's Law Dictionary, Eleventh Edition. St. Paul, MN: Thomson Reuters.
Heritage. (Accessed on November 10th, 2024). About. The Heritage Foundation. https://www.heritage.org/index/pages/about
Heritage. (Accessed on November 10th, 2024). All Country Scores. The Heritage Foundation. https://www.heritage.org/index/pages/all-country-scores
NASB. Amos 5:11a.
RentGuidelinesBoard. (Accessed on November 11th, 2024). Rent Control FAQ. Rent Guidelines Board. https://rentguidelinesboard.cityofnewyork.us/resources/faqs/rent-control/
Urban. (Accessed on November 11th, 2024). Rent Control Key Policy Components and Their Equity Implications. Urban Institute. https://www.urban.org/sites/default/files/2023-08/Rent%20Control%20Key%20Policy%20Components%20and%20Their%20Equity%20Implications.pdf