Rent control could prompt housing shortage

Rent control could prompt housing shortage
Seattle City Councilmember Kshama Sawant has proposed rent control legislation to curb rate increases. Industry members warn the strategy has already proven a failure in other cities and states. Photo: freepik.com

The average monthly rent for an apartment in Seattle is $2,130, a three percent increase from 2018, according to Rent Café. In July 2016, the average monthly rent was $1,758. Seattle City Councilmember Kshama Sawant has now proposed rent control legislation intended to curb rent increases. However, state law currently prohibits such policies, and local landlords warn other cities to adopt them have experienced housing shortages.

Marilyn Yim and her husband have been landlords for 16 years and currently rent out two triplexes and a duplex in Seattle. Yim told Lens that “we need more units for more types of families, and we’re not seeing that kind of diversity right now. With rent control it is going to make it even worse.”

During a Sept. 23 special meeting of the Human Services, Equitable Development, and Renter Rights Committee, Sawant announced her proposal to cap rent increases to inflation and require redevelopments to maintain the existing number of affordable units.

Even though rent control is prohibited by state law, Sawant’s website states that the strategy is intended to “put immense pressure on the Democrats in Olympia to repeal the ban” by “building a fighting movement to win rent control in Seattle.”

In 2016, the Seattle City Council passed a variety of renter-landlord ordinances that restrict how landlords choose tenants and caps security deposits and move-in fees.

However, those in the long-term rental industry warn the plan will backfire. According to the National Apartment Association, Seattle metro will need 77,563 more apartments by 2030 to keep up with demand. Yet a 2018 UW study found that roughly 40 percent of Seattle landlords “have sold, or plan to sell, property in response to City ordinances governing the housing market.” The report also noted that a large majority of landowners felt the city’s move-in fee restrictions placed an “undue burden on landlords and may reduce housing access for lower-income renters.”

Yim told Lens that capping rental rates will disincentive new long-term rental supply from entering the market. “There’s a lot of expenses that are beyond our control. You have to be able to cover them some way. At the same time, we are trying to keep those obvious expenses down while still maintaining our homes to what we think is good condition.”

One of the ways she said they keep rates down is by directly managing the properties rather than using a property manager.  “I think that’s a real factor here. Mom-and-pop is a cost-saver. We get to know our tenants. We treat them as our neighbors. I don’t think that people really have that window into that kind of relationship.”

Renting doesn’t always pay off for property owners in the short-term, Yim said, and in the first decade rent failed to cover their rental property expenses. On top of that, during the Great Recession they were forced to lower the rent.

“We knew that over time, this was going to be a good housing situation for us and a good investment in the end,” she said. “We managed what we try to have control over. We put a lot of effort into doing the work ourselves and still calling a contractor when we needed to.”

Industry members also point to other major cities and states in the U.S. that have already tried rent control. After Oregon implemented the policy, multifamily housing construction fell by 40 percent. Despite rent control, San Francisco’s monthly rent increased by almost 10 percent between April 2018-2019. A 2019 Stanford study concluded that rent control limited renter mobility by 20 percent, while landlords reduced rental housing supply by 15 percent.

“Thus, while rent control prevents displacement of incumbent renters in the short run, the lost rental housing supply likely drove up market rents in the long run, ultimately undermining the goals of the law,” the report concludes.

Yim said: “we need to look at a whole toolbox of solutions to address the housing crisis. There’s a lot of things our city and state leaders could be doing. Rent control is not an effective policy; it does not result in the things that people hope it will.”

1 COMMENT

  1. What’s better than rent control? A tax on vacant lots and unoccupied buildings. While rent control makes it less attractive to supply accommodation, a vacant-property tax makes it less attractive NOT to!  A vacant-property tax of $X/week makes it $X/week more expensive to fail to get a tenant, and thereby REDUCES, by $X/week, the minimum rent that will persuade the owner to accept a tenant.

    Such a tax, although sometimes called a “vacancy tax”, is not limited to what real-estate agents call “vacancies” — that is, properties available for rent. It also applies to vacant lots and other properties that are not on the rental market, and is designed to push them onto the market and get them tenanted.

    A vacant-property tax is intended to be avoided; if it’s properly designed, nobody actually has to pay it. And the *avoidance* of it would initiate economic activity, which would expand the bases of other taxes, allowing their rates to be reduced, so that the rest of us would pay LESS tax!

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