By: Colin Allen, Executive Director of the American Property Owners Alliance
Throughout the country, a shortage of middle-income housing and affordable rentals is limiting Americans’ ability to build their savings and pursue property ownership. As inflation rises and large investors drive up rental prices for the sake of profit, America’s housing crisis will only continue to escalate if Congress doesn’t step in immediately.
With the 118th Congress sworn in and eager to enact change, it is important to choose a sustainable path that will ensure home purchase and rental prices remain affordable for years to come. While many solutions are on the table, some are short-sighted and don’t address the heart of the issue—we need to build more housing.
Rent control has been proposed as a solution to curb the problem of housing affordability. However, several case studies prove that rent control is an ineffective, band-aid solution that ultimately decreases the supply of affordable rentals over time and shifts the financial burden of lower rent to mom-and-pop housing providers.
The reality is, developers are reluctant to build in rent-controlled areas because of limited return on investment, which decreases the supply of low- to mid-range housing units. In areas where rent control is newly imposed, large-scale investors have proven likely to convert rentals to owner-occupied condominiums, further constraining rental supply.
In a survey examining the effects of the 1994 rent control expansion in San Francisco, buildings where rent control was imposed were 8 percentage points more likely to be converted to higher-end, owner-occupied condominium housing than the non-rent controlled property control group. As a result of these high rental prices, fewer tenants lived in rent-controlled buildings, small multi-family housing decreased, and most rental supply catered to higher income households.
With a “this is the rent, take it or leave it” mentality, rent control and its supporters continue to reduce supply, heighten demand, undermine quality of life and limit property owners’ ability to make improvements. For example, data spanning periods of change in rent control laws in Cambridge, Massachusetts, found rent control policies imposed about $2 billion in costs on local property owners, yet only $300 million of that cost was passed on to renters in the form of lower rent. The study indicates that rent controlled properties ultimately made the Cambridge housing market and nearby neighborhoods less desirable, and they continue to do so in cities throughout the country.
Today, we can achieve a more affordable, navigable housing market by implementing smart policies, unlike the short-sighted option of rent control. These solutions include:
- Creating tax credits to convert unused or outdated commercial and office buildings into residential and mixed-use space that will maximize the use of existing properties and create more housing units in urban areas.
- As builders have focused on high-end properties with a guaranteed return on investment, middle-income housing and affordable rentals become scarce. We should modernize zoning to remove barriers to different types of home-building.
- Increasing the low-income housing tax credit will provide states with more funding which they can then use to incentivize the construction and rehabilitation of affordable rental housing.
As an immediate measure, local governments should consider employing targeted assistance to renters and housing providers to protect the vulnerable when gaps between rising wages and rising rent occur.
By pushing forward these smart solutions, Americans can save money, support their households and move one step closer to building equity through property ownership.
The American Property Owners Alliance (The Alliance) advocates for the rights of current and future property owners. Our aim is to educate and mobilize citizens in understanding, promoting and influencing the policies that support property owner protections. We understand that we can’t close the property ownership gap overnight. What we can do is work together at the federal, state and local levels to push forward creative, long-term solutions.
We’re playing our part in solving America’s housing crisis. It’s time for Congress to do the same.
About the American Property Owners Alliance
The American Property Owners Alliance
is a nonprofit, nonpartisan organization created to protect and support property owners. The Alliance educates property owners on federal issues, laws and policies; to advocate for owners’ rights and interests; and to mobilize when necessary to secure those rights and interests. The Alliance is primarily funded by NAR but operates independently from the association with its own board of directors and separate bylaws.
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