City Booms After Rent Control, but Working Class Must Pay the Price

Four years ago, the voters of Massachusetts did what no state had ever done: They eliminated, in almost one fell swoop, rent control policies that had stood for more than two decades.

And to walk down the streets of this university town, home to Harvard and MIT, is to see a transformation.

At Central Square, midway between the universities, a working-class hangout called Ken’s Pub has turned into an Au Bon Pain. Harvard Donut, a luncheonette, was replaced by a Starbucks. Irving’s Shoes is gone, and so is Frank the Tailor. Even more striking, farther north, William E. Thibodeaux, truck driver turned landlord to the rich, has erected four townhouses in his backyard and rents them out for $2,500 each.

And around the city, as many as 3,500 working families have had to find somewhere else to live.

Across America, rent control is an endangered policy. Only four states--New York, New Jersey, Maryland and California--plus the District of Columbia--still have on the books laws that limit the amount of money people can be required to pay for an apartment.

Designed to protect low- and moderate-income renters from the rising costs of housing, rent control has triggered such fierce industry opposition that 31 states have passed laws prohibiting their local communities from even trying it.

But none of those places has taken the bold step Massachusetts did: voting out the policies almost overnight. As a result, Cambridge offers an unprecedented glimpse into the public policy trade-offs that cities make as they attempt to balance protections for the poor against economic growth and development.

What Cambridge has found is that, in a heated political battle over the consequences of eliminating the policy, both sides were right, or at least partly right. The economic boon to the city has been sizable and sustained, but it has come, in part, because wealthier people moved in and the less fortunate moved out.

Rents, according to a recent study, have climbed dramatically, doubling in four years’ time from an average of $500 a month to more than $1,000. So far, 38% of the 16,000 families who lived in rent-controlled units have been forced to find other housing, and most of those left the city entirely. About 40% of all remaining Cambridge tenants pay more than a third of their income for rent, a level of housing payments considered too high under most federal and state guidelines.

But if the negative consequences of eliminating rent control have been high, so have the economic benefits. Many working-class families may have left, but in their stead have come thousands of new tenants, whose incomes flow to city restaurants and retailers, and whose high rents generate more tax dollars for city coffers.

The lifting of rent controls also has produced a burst of new building activity by landlords who say that, after decades of stagnation, they can finally afford to charge rents that allow them to erect new housing. In truth, new construction was always exempt from rent control, but the landlords say the very existence of such policies had a chilling effect on the real estate industry.

Few could argue that the housing changes are not dramatic. New housing and construction increased by 50%, and tax revenue generated from construction permits has risen almost threefold.

For homeowners, tax bills actually shrank during the first year that rent control was lifted, as apartment owners carried more of the tax burden.

Housing director Roger Herzog says the community concerns are shifting too, from affordable housing, health care and schools to the problems of more affluent citizens: traffic, crime and dog waste.

If public policy is a question of trade-offs--in this case, protecting the poor vs. promoting unbridled economic development--then Rick Hill stands as human testament to the consequences.

When Cambridge underwent its economic renaissance, it drove Hill out of town. A pipe fitter with five children, Hill says he was evicted from his apartment when he could no longer pay the escalating rent.

Now living in a cheaper area of Boston, he dispatches the third mouse he has trapped in his kitchen since morning, complains of “fast” teenagers influencing his daughter and tough boys threatening his son.

But what upsets him most about being pushed out of Cambridge “is that I helped build the [subway], I helped build Harvard, I helped build the roads, and all these yuppies just take over like it’s nothing.

“They act like they’re better than everybody else,” he said, “when we were born there.”

The end of rent control coincided with an economic boom in the Boston area, including Cambridge, and nobody knows how much of the city’s bonanza should be attributed to the business cycle and how much to the end of rent control.

Edwin J. Shanahan, executive director of the state Rental Housing Assn., which represents apartment owners across Massachusetts, calls the elimination of rent control a “godsend. We had a 20-year dearth of new construction. Now the city is very, very much alive again.

“In the long run, there will be benefits to the neighborhoods, benefits to the whole city,” he said. “I can’t say there are a lot more affordable housing units today, but there damn well will be in the future.”

In some cases, the working-class residents who made up part of the old guard in Cambridge have simply positioned themselves to profit from the change. Thibodeaux, who continues to hold down the afternoon shift at the local trucking company, rents his fancy new townhouses to the chief financial officer of a British company, two management consultants, a businessman and three students at Harvard Business School.

“I never would have built them under rent control,” Thibodeaux said.

Peter Dreier, a professor of public policy at Occidental College in Los Angeles and former pro-rent-control Boston housing director, disagrees.

“The end of rent control has certainly been a disaster for those who want to see Cambridge an economically and socially diverse city,” he said. “Increasingly it will become an island of the wealthy, and it will have ripple effects throughout the whole Boston area.

“Government policy should try to mitigate the market forces that are widening the gap between the rich and the poor. The end of rent control exacerbates it instead.”