Question
Hi Shane,
I’m a current master’s student in urban planning (and listener of the Housing Voice Podcast) and recently read your book, Affordable City. In it, you emphasize the importance of stability and discuss rent stabilization. This has been a topic of discussion in places I’ve lived recently.
I have been trying to read more about this policy and have encountered some research like this, indicating that even stabilization policies tend to lower rental supply and increase rents in the long run, even if current tenants are protected from displacement. Another study looking at New Jersey municipalities indicated little to no effect on median rents in the aggregate as a result of stabilization (even calling the measure “symbolic”).
I’m deeply interested in ways to ensure affordability in the long term, and I’m having trouble determining the value of rent stabilization, given the mixed research. Is there a way you think about this issue that you think might be helpful?
Thanks,
XXXXXXX
Answer
Hi XXXXXXX,
Thanks for reaching out (and for listening to the podcast!).
And yes, I think those are all fair ways of interpreting the research on rent control/stabilization, though I'd suggest that they're also a bit incomplete. In my view, rent stabilization is not a long-term affordability strategy. It's a security/stability/stability strategy, which in some cases at the household level manifests as an affordability policy.
In the aggregate, the costs and benefits of rent stabilization are probably roughly a wash (see Diamond et al. 2019 e.g.), though the stronger forms of rent control are probably a pretty large net negative (see/hear our conversation with Richard Green and Sahil Gandhi on the podcast). To some extent, people who stay in place longer benefit from rent stabilization while new arrivals and those who move more frequently pay some cost, on average — that's undoubtedly true.
But among other things, I think who pays and who benefits also matters, and the two charts below (which I created a while back) tell an interesting story about that.
This first one shows that households living in pre-1980 multifamily housing in LA (i.e., rent-stabilized housing) are much more likely to have lived in their units for 10 or more years compared to non-RSO multifamily housing in LA and both pre- and post-1980 multifamily in Long Beach (which doesn't have a rent stabilization ordinance), about 7 to 9 percentage points or 25-35% higher. That tells me there are a lot of people who were able to stay in their homes longer because of LA's rent stabilization policy. (Some people might say those people are stuck in place because of rent stabilization, and they're not wrong, but the implication is that if not for rent stabilization, those households would be able to find many alternatives at a similar rent to what they're currently paying, which I find extremely doubtful. Long Beach, again, doesn't have rent control, yet it's not meaningfully more affordable.)
The second chart shows that the households who've lived in these rent-stabilized units for longer are not only paying less than people who've moved more recently (which is to be expected), they also have much lower incomes. Again, I don't find it plausible that the household who's lived in their unit for 30 years and earns $27,000/year would be better off without rent control. On average, I suspect they'd be much worse off.
But beyond that, coming back to my comment on seeing this more as a stability/security/predictability policy, one thing none of the studies are able to account for — through no fault of their own — is the value of peace of mind. I think I've mentioned this one the podcast before, but something I always come back to is this randomized controlled trial of Medicaid expansion in Oregon, which found "increased health care utilization, reduced financial strain, and reduced depression, but produced no statistically significant effects on physical health or labor market outcomes."
One way of interpreting the study is "Look, it didn't achieve its goal of improving health! Medicaid expansion is a failed policy!" Given that improving health is probably the #1 goal of Medicaid expansion, it's not a totally unreasonable response. (For our purposes, we can ignore the fact that the study only looked at the first 1-2 years after receiving coverage, and it might have improved outcomes there too eventually.) But that interpretation completely dismisses the value of increased healthcare utilization (i.e., being able to go to the doctor when worried about your health), reduced financial strain, and reduced depression. I am very confident, though, that the people who experienced those outcomes were quite happy to have received Medicaid.
People buy insurance (or government provides it) not only because it provides them a valuable service, but because it provides them peace of mind. It's stressful to not know if an unexpected illness will lead not only to health problems, but to bankruptcy as well. It's also stressful to not know if your rent will go up 5% or 30% next year, or if you'll be evicted in 6 months or 5 years despite adhering to the conditions of your lease. Peace of mind, or security, or simply happiness or the absence of sadness/depression, is harder to measure, and especially difficult to assign a dollar value to, but it has real value nonetheless. It's also the kind of thing that I believe rent stabilization (paired with good/just cause eviction protections) provides much more broadly and reliably than affordability.
I wrote in my inclusionary zoning paper that the problem with IZ, in my view, is that it tries to use land use policy to solve a problem best solved by using public subsidies. I see rent stabilization in roughly the same light. Land use policy is the best tool for broad, market-wide affordability. Subsidies are best for ensuring quality, affordable accommodations for lower-income people. Rent stabilization and similar policies are best for providing security and peace of mind. We get into trouble when we misunderstand the strengths and weaknesses of the tool we have in hand.
Cheers,
Shane