Housing Is Necessary, So Rent Control Is Justified
Ever since rent control was introduced in this country during World War I, it has generated intense legal and political controversy. In February the U. S. Supreme Court settled many of the legal issues by ruling, in a San Jose case, that rent control was constitutional. In his majority opinion, Chief Justice William H. Rehnquist held that tenant welfare was a legitimate governmental goal, and rent control rationally furthered that goal. Justices Antonin Scalia and Sandra Day O’Connor dissented because they disagreed with the economic theory behind the San Jose law. But, as Rehnquist properly recognized, debates over social policy belong in the political arena and not in the courts.
The political debate is likely to continue as the popularity of rent control spreads. Currently, 200 American cities regulate residential rents, representing 12% of the nation’s rental-housing stock. In California, about half the state’s renters are protected by some form of rent control. These numbers will increase because the conditions which make regulation necessary are not improving.
The social policy behind rent control is generally twofold. First, it seeks to preserve affordable housing for low- and middle-income families. Due to a variety of economic factors, low-cost rental housing is becoming scarce, particularly in industrialized urban areas. Vacant land in our major population centers is virtually exhausted; slow-growth movements resist any increase in density, and developers reap greater profit from condominiums or office buildings than apartments. There is also less upward mobility in the renter-to-owner cycle as home prices skyrocket. At the same time, there has been a dramatic decrease in federal funding for low-income housing during the Reagan Administration (from $27 billion in 1981 to $11 billion in 1986).
This economic restructuring of the housing market tends to reduce the availability of affordable rental housing. In parts of Los Angeles the vacancy rate is five times lower than what is sometimes described as a “crisis” condition. Where the vacancy rate is low, landlords enjoy a quasi-monopoly in the setting of rents and conditions for tenancy. Such an imbalance in bargaining power can result in consumer exploitation. In similar cases, such as utilities, we have come to accept the social necessity of government regulation and price control.
The second purpose of rent control is to prevent the hardship associated with losing one’s home. Where alternative housing is unavailable, eviction can mean displacement from the community. All Americans share the goal of stable and secure housing. Yet for tenants, that goal can easily be shattered by rents that rise two or three times as fast as usual, or by displacement caused by eviction, demolition or conversion. As Rehnquist noted, this is not only a substantial hardship for affected tenants, but it drains community resources and imposes “severe social costs.”
Government is generally more sensitive and responsive to the rental-housing crisis on the local level. This is because the quality of our neighborhoods has traditionally been a municipal concern. State and federal governments often note the severity of the problem but leave it to cities to fashion solutions. Yet a city’s range of options is limited. Taxing and spending for social programs is not only out of vogue in the ‘80s, it is often impossible because of severe restrictions in state constitutions (e.g., Proposition 13, Gann limits). Until these constraints are removed or the federal government re-orders its priorities, cities often turn to rent control. Similar mechanisms, such as condominium-conversion laws and protection from arbitrary eviction also serve the goals of preserving rental housing and preventing tenant hardship.
Opponents of rent control press two main points: that it unfairly singles out landlords to bear the brunt of social policy; and that it is counterproductive because it discourages investment in housing. These arguments cannot be dismissed out of hand, but they must be placed in perspective. Landlords as a group have benefitted from housing scarcity and other governmental policies such as zoning and favorable tax treatment; and most investors would prefer to be in rent-controlled Los Angeles than in un-controlled Houston. It is fair to target the causes of tenant hardship and displacement--rapidly rising rents and conversions.
Despite popular myth, little hard evidence has been produced linking rent control with housing deterioration. The Bronx, long viewed as a negative example, is now undergoing revitalization and economic development. Housing neglect does not visit its sins on rent-controlled cities alone. It is the product of larger economic forces. Rent control can encourage investment by exempting new construction and providing rent increases for repairs and capital improvements.
There is plenty of room for debate on specific rent-control programs. But the basic policy is sound. As Oliver Wendell Holmes observed two generations ago, “housing is a necessary of life. All the elements of public interest justifying some degree of public control are present.”
