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Rent Control Is Not the Answer to Our Housing Crisis

Decades of Research Shows Its Harm

By Tamara Small | This column originally appeared in Banker & Tradesman on September 11, 2022

In July, yet another report was issued highlighting the housing crisis in Massachusetts. The Housing Underproduction Report examined markets throughout the country and found that Massachusetts needs to build more than 100,000 additional homes per year to keep up with demand. The Boston area ranks No. 14 for underproduction in the nation – not an accomplishment we should tout.

The housing crisis is the leading social, economic, and environmental threat to our region. Truly tackling this issue will require innovative new policies that encourage growth and development, while also protecting the environment. Unfortunately, several cities and towns in Massachusetts, including the city of Boston, are looking to ignore state law and revive a failed policy from the past as a solution – rent control.

Affordable and middle-income workforce housing is critical to the region’s competitiveness, and NAIOP believes that solutions focused on housing production and expanding rental assistance programs for residents in need should be forefront in policymakers’ toolkits for addressing housing instability and affordability in all communities.

Academic Studies: It Fuels Gentrification

The evidence across decades of academic literature shows that even the best-intentioned rent control policies have unintended harmful effects on the overall housing market – and the very populations they intent to support. Even if rent control appears to help renters in stabilized units in the short run, in the long run it decreases market affordability and often fuels gentrification.

Rent control has been shown to reduce the overall supply of available rental housing; cause higher rents in the uncontrolled market – causing all renters not in a rent-controlled unit to pay more; limit geographic and economic mobility for residents by mismatching unit types and sizes to the needs of the household; and does not target benefits to those who need it most.

Boston is not a vacuum – and no community should act as one when considering policies that have enormous ripple effects throughout the region. Rent control will not address underlying housing challenges because housing development has not kept up with population or job growth. Enacting rent control or rent stabilization policies in any community will, in fact, exacerbate these challenges by stifling the market’s ability to deliver needed new homes.

In Washington, even the less-strict proposals for rent control policies would, if enacted, negate a full year and a half’s worth of housing production – something Boston and other communities cannot afford to consider. Additionally, rent control policies impact economic activity and jobs by reducing the investment in housing – thereby reducing employment in the skilled construction trades and other professional services. When 1 in 6 jobs in the commonwealth are located in Boston, the implementation of an ill-advised housing policy can negatively impact not just the economy of Massachusetts, but our neighbors in Rhode Island and New Hampshire.

A Better Alternative Exists

Massachusetts already has many policies and market factors that delay and influence the cost of housing producing new housing. While demand is still strong, surging construction prices, compounded by the supply chain shortages, have led developers to consider delaying, or even stopping, some projects across the commonwealth. Construction costs alone are up 30 percent to 40 percent over pre-pandemic levels. When combined with policies that have been proven to hurt the market, NAIOP is concerned that short-sighted policies like rent control will detrimentally affect not just Boston, but the entire region.

In 2019, the initiative on Global Markets at the University of Chicago’s Booth School of Business surveyed expert economic panelists on current topics in public policy. When asked if they agreed with the statement, “Local ordinances that limit rent increases for some rental housing units such as in New York or San Francisco, have had a positive impact over the past three decades on the amount and quality of broadly affordable rental housing in cities that have used them,” an overwhelming majority of the panelists responded “Disagree” or “Strongly disagree.” We must listen to the experts and explore housing production policies that address the mismatch in supply and demand, rather than artificially influencing the market using policies that are proven to do more harm than good.

The development community is a crucial sector of the Massachusetts economy. From creating affordable housing units to implementing critical climate resiliency measures protecting our neighborhoods and encouraging further investment in our communities, NAIOP members are forefront in addressing the commonwealth’s biggest challenges – while creating critical jobs in construction and providing the economic infrastructure required to attract new employers to the economy.

We urge policymakers at the state and local levels to recognize the well documented and proven negative impact of enacting rent control policies – and to instead focus efforts on encouraging production of all housing types by lowering barriers and costs to promote growth and prosperity for all.

Tamara Small is CEO of NAIOP Massachusetts, The Commercial Real Estate Development Association.

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