Category Archives: Rent Control

Rent Stabilization Has Ended: That’s Good News

Del. Jheanelle Wilkins lamented yesterday that Montgomery County has ended its 2022 0.4% cap on rent increases:

Today, May 15, marks the end of Montgomery County’s limitation (.4%) on rent increases. Unlike most areas across the country, MoCo residents have been able to avoid sky-rocketing rent increases. I fear for what’s next as this limit lifts.

Takoma Park has its own rent cap, which has risen from 2.6% last year to 7.3% this year, an increase that Del. Wilkins described as “pretty high!”

At the height of the pandemic, temporary controls on top of the freeze in evictions might have made sense except that there was no evidence that rents were going up. (Freezing evictions made sense as so many had their income temporarily disrupted, we wanted people to stay home, and how on earth were people supposed to move?)

Since then, Montgomery County’s cap has had the effect of reducing rents in real terms because the cap was set far below the current inflation rate. While the cap was set at 0.4% starting in February 2022 (and 1.4% prior to that), inflation has been running at 7.3% in the D.C. metro area. Even if a landlord raised rent by the full 0.4%, they saw a 6.4% decline in real income.

Nevertheless, Del. Wilkins would like rent stabilization made permanent:

Rent stabilization should be the standard everywhere. MoCo’s successful rent limit experiment demonstrates that stabilization works! While rent has risen all around us, MoCo residents have had this strong protection.

Many oppose rent control on liberty and freedom grounds. After all, rent control is the government forcing people to sell the right to use their property at arbitrarily low prices to whoever happens to occupy it. Though this weakening of property rights is promoted as a transfer from the wealthy to the poor, there is no guarantee the rent-controlled units are occupied by the poor or that their landlords are necessarily rich.

Of course, many renters have salaries that are not keeping up with inflation. But that’s not the landlord’s problem. Banks don’t cut landlords or other mortgage holders a break when their income isn’t enough to pay the mortgage. Landlords aren’t automatically granted an extra big rent increase when their tenant gets a major salary bump.

If we maintained the cap for additional years, as Del. Wilkins supports, the gap between what are now effectively rent stabilized and market rate units would only grow. The more we require landlords to rent at artificially low rates and limit earnings potential, the less incentive there is to build housing. Even if laws exempt new housing, developers are understandably reluctant to build in areas that are willing to adopt controls on existing housing. The same controls could be extended to their property.

The longer rent control or stabilization stays in place, the more it distorts markets. People don’t want to leave rent-controlled apartments because they are unusually cheap. They become an even better deal as the decline of new building results in even higher housing prices.

The combined attack on property rights and on new housing eventually led both Massachusetts and New York—not exactly known as right-wing hotbeds—to eliminate or to drastically curtail rent stabilization and control. Since the value of rental buildings is heavily tied to income generated by the rent, avoiding rent control also prevents denuding the tax base–important to remember if you want the county to keep up the schools or to pay for expensive social programs.

Del. Wilkins is right that prices may swing up precisely because they have been kept artificially low. We already have measures in place designed to assure that new projects provide social benefits, such as MPDUs, at financial cost to developers. Let’s avoid shrinking the housing supply through long-term price controls.