On July 18, Montgomery County, Maryland imposed rent control. Montgomery County has over a million people, so this will affect a lot of people.
This is the latest dumb decision from a county that used to be the richest major county in America, in terms of household standard of living, but now ranks below many other counties in the Washington, DC area, due to bad economic policies that have shrunk the supply of jobs and housing in the county. (It is poorer than neighboring Howard, Fairfax, Loudoun, and Arlington counties, although it remains wealthier than most counties in the U.S.).
As a result of the decision to impose rent control, the supply of housing is already shrinking in Montgomery County. As Montgomery Perspective notes, “A Montgomery County-based developer has written the county executive and the county council with news: their company is stopping a county project because of the pending passage of rent control. And they are not alone as at least six other developers are stopping further projects here and shifting resources to other areas including Northern Virginia.”
The publisher of Bethesda Magazine reports on yesterday’s 7-to-4 vote by Montgomery County’s all-Democrat County Council to impose rent control:
The Montgomery County Council voted to pass permanent rent stabilization in a landmark decision Tuesday. Dozens of rent control advocates who waited over nine hours in council chambers cheered as the vote came, while at least one worried councilmember warned of “a cascading negative effect for generations.”
Bill 15-23 will cap annual increases at the region’s consumer price index (CPI) plus 3% , with a hard cap of 6% of the base rent.
“This a proud day,” said Councilmember Will Jawando (D-At-large). “It’s going to protect and provide stability for our residents. … This will be a historic day for not only Montgomery County, not only the state of Maryland, but the country. We’re one of the largest jurisdictions in the nation to do this.”
The vote was 7-4, with councilmembers Gabe Albornoz (D-At-large), Andrew Friedson (D-Dist. 1), Marilyn Balcombe (D-Dist. 2) and Dawn Luedtke (D-Dist. 7) voting against the legislation.
“We’d be naive to think that this isn’t going to have a substantial impact on the possibility of future growth of the county and will have a cascading negative effect for generations. We’re playing with fire,” Albornoz said.
Individuals owning four or fewer units will be exempt from Montgomery County’s rent control ordinance, at least for the time being.
Almost all economists think rent control is a bad idea: In a 1992 poll, 93 percent of them agreed that rent control reduces the quantity and quality of housing available. Reason writes that “rent control has a history of constricting the supply of rental housing and reducing housing quality.”
As the Wall Street Journal observes, “If there’s any consensus in economics, it’s that rent control achieves the opposite of its intended goal. It leads to housing shortages by discouraging new development and maintenance of existing properties. Rents rise faster in properties not subject to controls. Even 60% of California voters rejected a ballot measure in 2020 to expand rent control.”
Most states have laws banning rent control, but Maryland doesn’t. In some places, voters have banned rent control or refused to authorize it, in referenda.
Imposing rent control harms local governments by reducing the value of housing. By cutting the value of housing stock, rent control reduces the property tax revenue that funds schools and local governments. “Researchers at the University of Southern California said rent control hurt property values in St. Paul, Minn. by $1.6 billion,” reported Market Watch.
As the liberal Brookings Institution notes, “Rent control can also lead to decay of the rental housing stock; landlords may not invest in maintenance because they can’t recoup these investment by raising rents.” Rent control also results in some housing being largely empty, and other housing being crowded as a result, it says:
Rent control can also lead to “mis-match” between tenants and rental units. Once a tenant has secured a rent-controlled apartment, he may not choose to move in the future and give up his rent control, even if his housing needs change…This mis-allocation can lead to empty-nest households living in family-sized apartments and young families crammed into small studios.
