“How thoroughly did enactment of rent control kill off applications for new construction of multifamily (5+ units) housing in the Maryland suburbs of D.C.? Both Prince George’s and Montgomery authorized zero such units in one recent period while the rest of the state authorized 2,038 of them,” notes Walter Olson of the Cato Institute.
Adam Pagnucco of Montgomery Perspective adds:
In the wake of Montgomery County’s passage of a new rent control law, the county has seen its multifamily construction market disappear. Will it ever recover?
On July 10, the county council received a briefing on economic indicators from the Montgomery County Economic Development Corporation (MCEDC), the county’s economic development authority, and the Montgomery County Planning Department. The briefing showed a slowdown in the county’s labor market in the first quarter, with the number of employed people falling, the number of unemployed people rising and the unemployment rate rising slightly (although still very low at 3.1% in March)… the real news came on residential building permits, a measure of the county’s construction market.
The report said this: “Permits for townhouses and duplexes (210) in the first quarter of 2025 were close to their first quarter levels from 2024…[But for] Multifamily permitting … this quarter’s seven units permitted is the lowest multifamily quarterly volume in the dataset we currently use, which goes back to 2019. The next lowest quarter was the previous quarter (fourth quarter of 2024, with eight permits), meaning that only 15 multifamily units were permitted in the six-month period from October 2024 to March 2025. The continuance of this slow pace for another quarter or two could indicate significant challenges.
When Montgomery County imposed rent control, some housing projects stopped as a result.
In 2023, The Wall Street Journal said, “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.”
Similarly, the liberal Washington Post said, “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 since rent-stabilization policies often tend to discourage people from moving, they harm worker mobility and the economic dynamism associated with it.”
Rent control also reduces the quality of housing over time. 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.”
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.
As the Washington Post notes, “landlords have less incentive to maintain their properties in a rent-controlled environment,” harming housing quality.
It is dumb for local governments to impose rent control, because that can reduce 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,” reported Market Watch.
