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Get it under control!! Is nationwide rent control feasible?

Protesters decry high rents in urban area.

· 4 min read

Contextualizing the finance news you need to know.

Personal Finance 101 states that 30% or less of your gross income should go to housing. That includes rent or mortgage payments, along with homeowners association fees and utilities. Yet this rule of thumb, while easy to understand, is hard to put into practice.

In 2019, nearly half of all renters paid more than 30% of their income to housing, with about a quarter paying more than half their income, according to the Joint Center for Housing Studies of Harvard University. And reminder—that was the tail end of what would go on to become the longest economic expansion in US history.

Some, like grassroots tenant groups, see rent control as a way to mitigate this hardship. Others, namely landlords and economists, see it as a disaster. So…which is it?

Touring rent control

Federally mandated rent control on a mass scale may sound like a radical policy that could never happen in the US, but it’s actually happened before.

During World War II, the federal government imposed rent ceilings along with other price controls to make it easier for soldiers to punch Nazis. But even after the war ended, rent control maintained through much of the 1940s.

But more recently, rent control proponents have gained steam, and industry groups like the National Multifamily Housing Council (NMHC)—the self-proclaimed “leadership of the trillion-dollar apartment industry”—aren’t taking the trend lightly. Similarly to how a comic book nerd will assess each villain’s threat level, NMHC tracks the threat of rent control in each state.

Granted, it isn’t just corporate property owners collecting rent. About one in three rental units are owned by individual investors, according to 2021 Census data, and most of the properties they own are single-family units. These smaller landlords, which are a small constituency, feel squeezed by tenant protections and mortgage loan providers; the infinite rental price growth, real estate values, and borrowing power they had expected have not panned out in the long run.

But even some critics concede that rent control helps provide stability for existing tenants in the short term, according to Vox. It also prevents displacement by ensuring current tenants aren’t priced out of their neighborhood.

OK, tenants, now let’s get in formation

In an interview with CNBC about high rental costs in cities, personal finance writer Ramit Sethi said: “We can’t throw our hands up at the biggest expense of all. We have to develop a real strategy for handling it.” Perhaps Sethi was thinking of using some rent negotiation strategies (he does have good ones). But as he says, money is political.

Renters across the country are organizing. Groups like KC Tenants, based in Kansas City, Missouri, have urged the Federal Housing Finance Agency (FHFA) to require rent control for landlords who borrow federally backed mortgage loans and to enact local tenant protections.

And it isn’t just tenants who are behind this idea. In July 2023, a group of 32 economists wrote an open letter to the FHFA, stating they “believe that implementing rent regulations as a condition on federally backed mortgages will protect tenants, stabilize neighborhoods, promote income diversity in regional economies, and improve the long-term outlook for housing affordability.”

The group of economists compared the issue to the debate around minimum wage increases—i.e., how the 20th-century neoclassical argument that wage increases would lead to job losses has been debunked. They also cite evidence that rent control isn’t likely to discourage construction.

TL;DR: As the New York Times noted, the logic that policy makers rely on to understand global markets no longer seems to make sense (if it ever did). Perhaps the same could be said about housing policy.

In some areas, the pendulum is swinging back to a favorable view of rent control, as NMHC has warned: “Whether or not [rent control] measures are enacted, they will get media attention and, as such, pose a reputational threat to the apartment industry at a minimum.” Rent control could be one way to rein in the housing crisis—and renters may be desperate enough to try it. Who can blame them?