“A Washington bill capping annual rent increases at seven percent statewide has passed the state House of Representatives. It will now be considered by the state Senate,” reports Reason Magazine.
This bill was supported by every Democrat in Washington State’s House of Representatives, and opposed by every Republican. Since the state Senate is also controlled by Democrats it will likely pass the state Senate, too, and be signed into law by Washington state’s Democratic governor.
Sometimes inflation exceeds seven percent — such as it did in 2022 — and when it does, the bill would prevent rent from keeping up with inflation, even if tenants’ wages and social security payments are rising as much as inflation. Wages have risen faster than inflation over the last decade as a whole, and social security payments get cost-of-living adjustments to keep up with inflation.
The Washington Policy Center criticizes this rent-control bill:
Rent control decreases available rental property and creates ‘apartment lock’ – people in a rent-controlled apartment don’t want to move, fearing they’ll lose the sweetheart deal the law provides. That means normal market turnover is blocked, and young apartment-seekers have fewer choices, and must move farther out or pay higher rents.
HB 2114 would limit rent and fee increases to 7% and would increase the notification period to 180 days for increases over 3%. The tenant would be able to terminate a lease within 20 days and if the increase is over 7%, the tenant would receive damages and up to three months’ rent.
HB 2114 would also;
- Cap late fees at $10, which removes any incentive to pay rent on time.
- Limit move in fees and security deposits to 1 months’ rent.
- Exempt Government housing authorities from rent control.
Rent control reduces access to new affordable housing. When the government imposes price controls, supply quickly dries up. Imagine the government slapped a price control on cell phones to make them “affordable” – obviously new smart phone offerings would quickly disappear.
Instead, policymakers should make housing more affordable by cutting property taxes and pointless permitting rules that make building homes so expensive. If the supply of rental property increases, rental costs will go down.
Rental property owners are likely to increase rents at the maximum 7% allowed each year to cover future, unanticipated costs whereas today, they may choose no increase to encourage a good tenant to stay.
Raising rent to keep up with inflation isn’t what most people would consider “rent gouging,” even when the landlord has to increase rent by more than 7%. For example, Washington, DC’s rent control board allowed landlords to raise rents on most tenants 8.9% in 2023, to compensate for 6.9% in inflation.
Economists oppose rent control because it makes it more difficult for people to find decent housing in the long run. In a 1992 poll, 93 percent of them said rent control reduces the quantity and quality of housing available. As the Wall Street Journal notes, “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.”
Even progressive economists mostly think rent control is a bad idea: The Swedish economics professor Assar Lindbeck, a Social Democrat, said, “rent control appears to be the most efficient technique presently known to destroy a city—except for bombing.” Similarly, the liberal Washington Post explains, “Rent-control laws can be good for some privileged beneficiaries, who are often not the people who really need help. But they are bad for many others.” For example, after San Francisco imposed rent control, “landlords responded by converting their buildings into condos they could sell or business properties they could lease without rent-control restrictions — or by demolishing their old buildings and replacing them with new ones” not subject to rent control. Moreover, “landlords have less incentive to maintain their properties in a rent-controlled environment,” reducing housing quality. “And since rent-stabilization policies often tend to discourage people from moving, they harm worker mobility and the economic dynamism associated with it.” These observations were made by the progressive-leaning editorial board of the Washington Post, which has not endorsed a Republican for president since 1952.
Rent control also reduces the quality of housing over time. As the liberal Brookings Institution points out, “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.”
When landlords can’t raise rents to pay for repairs and renovations, they may let apartment buildings decay. After New York limited rent increases to pay for major capital improvements to 2 percent, landlords cut back on such improvements. A survey of rent-stabilized landlords found that when rent increases were curbed,
Three out of four reported cutting back on essential building-wide repairs, such as a roof or boiler replacement, since the rent law passed. Nearly 90 percent said they had forgone kitchen or bathroom renovations. Just over half decided against revamping their buildings’ security systems to include cameras or video intercoms or adding storage lockers for deliveries to thwart porch pirates. Efficiency upgrades have also been pushed to the back burner. Over 40 percent of respondents said they would not replace lighting with LED fixtures that use 90 percent less energy — a budget saver for tenants. A quarter said they opted against installing fuel computers, which better regulate heat and hot water systems and reduce a building’s energy consumption.
Rent control reduces the value of housing stock, shrinking 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,” noted Market Watch.
