The Joint Housing Committee of the Massachusetts Legislature recently held a virtual hearing on House Bill H.1378, a proposal to grant cities and towns the right to establish rent control. As a person who lived in a rent control apartment, then owned rent-controlled apartments, and now owns unregulated apartments, I have broad experience of the issue. This series explores the potential, and pitfalls, of rent-control as a mechanism to address our housing supply and affordability crisis.
A Brief History of Rent Control
The first rent control laws in the US were adopted in the 1920’s. They expanded in the wake of World War II, with a desire to ensure affordable housing for returning vets, primarily in large, coastal cities. The salient feature of rent control was establishing a maximum allowable rent for any dwelling. Across-the-board adjustments were indexed annually (similar to a COLA: Cost of Living Adjustment). The maximum allowable rent for a particular unit could also be increased when local rent control boards approved landlord petitions supported by capital improvements to their property.
The 1950’s economic boom created unprecedented construction and suburban expansion; rent control fell out of favor. The general perception was that people who lived in rent-controlled units enjoyed unfair advantage. Meanwhile housing stock deteriorated as owners of rent-controlled buildings, put off from battling rent control boards for meager increases, provided minimal maintenance.
In the 1970’s most cities with rent control shifted to a second-generation system: rent stabilization. Rent stabilization varies from rent control in one important way; the landlord can ‘reset’ the base rent when a tenant moves out. This offers financial incentives for landlords to maintain their property, while encouraging tenants to remain in place. An upside of rent stabilization was promoting more stable neighborhoods; a corresponding negative was landlords trying to get rid of long-term tenants. Many landlord/tenant relationships got ugly.
As economic theory swung from Keynesian to free-market in the 1990’s, both rent control and rent stabilization were denounced as proto-socialist relics that impeded real estate development in a supply-side world. By definition, those evaluations ignored the fundamental premise of rent control: that housing is a right, and we all benefit when everyone enjoys stable, secure places to live.
The legal mechanisms that determine whether rent control thrives or perishes are significant; they reflect conflicts between federal, state, and local authority that infect much of our political discourse to this day. Rent control laws are municipal: enacted by a city or town. Yet, the ‘authority’ to enact rent control rests with the states. Large cities, with majority tenant populations, often favor rent control; while state legislatures are less inclined to support laws portrayed as economic drags that benefit a select few.
The history of rent control in my city, Cambridge Massachusetts, is both representative and unique. Massachusetts was late to the rent control game: it did not pass enabling legislation until the early 1970’s. The City of Cambridge thereupon enacted a system of pure rent control rather than second generation rent stabilization. Every residential building in the city with four units or more (plus any that were not owner occupied) was registered, maximum allowable rents established, and increases for capital improvements or inflation granted upon approval of the Rent Control Board.
It didn’t take long for tales of outrageous inequity to surface: Harvard professors and city council members living in large apartments for less than $200 a month. Landlords tried to circumvent the law by flipping rental units to condos, only to have the city stiffen condo conversion requirements. Each side dug into their position; although, in a city of 70% renters, rent control advocates held the upper hand. Rent increases were notoriously stingy, and people who purchased condominiums listed on rent control rolls could not occupy their own units. Real estate tensions in the city were explosive.
By the 1990’s, most Massachusetts cites who had adopted rent control had abandoned it. Boston and Brookline exercised rent stabilization; only Cambridge maintained strict rent control. A ‘local’ group known as SPOA (Small Property Owner’s Association) came up with the brilliant, if not exactly small ‘d’ democratic idea, of a ballot initiative to overturn the enabling legislation: i.e. get rid of rent control in Cambridge by making it illegal throughout the entire state. In 1994, citizens from Massachusetts’ 351 cities and towns were able to determine the fate of a policy that only affected three localities.
Rent control was abolished by a statewide referendum vote of 51% to 49%. A series of endgame tactics by the city failed to preserve any elements of the system. Frank Duehay, the sole city councilor who voted to create rent control and also witness its demise said, “I have to ask, is it better to have something or is it better to have absolutely nothing?” Overnight, residential rents in Cambridge went from being highly regulated, to completely unregulated.
If ever there is a case study in which both sides lost through their inability to communicate and compromise, this is it. Compare the physical dilapidation and inequitable rents that accompanied Cambridge’s diverse and funky vibe during 25 years of rent control, with the immaculate yet unaffordable, culturally sanitized city we’ve created twenty-five years later. Rent control was neither fair nor beneficial. Unfettered rents have created a different set of inequities.
Next Up: Rent Control and Me