It’s Time to Revisit Rent Control in Massachusetts

In 1994, Massachusetts voted on Question 9, a referendum prohibiting rent control. Question 9 passed by a narrow margin, abolishing rent control laws in Boston, Cambridge, and Brookline.

Now more than 20 years later, it’s time to revisit rent control in Massachusetts. As homeownership becomes an increasingly unrealistic option for many, the cost of not addressing rent control is simply too high. Data from Harvard University’s Joint Center for Housing Studies indicate that homeownership rates are at two-decade lows and primed to fall further. According to the Center, Generation X (born 1965-1984) was hit hardest by the 2008 Housing Bubble. The generation prior, the Baby Boomers, escaped largely unscathed. By 2030, Generation X will start reaching retirement age, and it’s likely many of them will rent. With home equity wiped out due to the Housing Bubble, Generation X may be deterred from purchasing homes. For those of Generation X who manage to buy a home between now and retirement, low levels of equity may push them back into the rental market.

Housing continues to conglomerate into the hands of corporations. Americans lost trillions of dollars in wealth during the Great Recession, due in part to bank seizure of 5 million homes. African American families were especially affected, with 53% of all wealth held by African American families evaporated. Of the foreclosed homes, many were purchased by private equity firms. In one case, Blackstone, a behemoth New York firm, purchased 1,400 Atlanta houses in a single day. In 2013, Blackstone was accumulating homes to the tune of $100 million per week.

Meanwhile in Boston, students are renting apartments using student loans. Rental prices, and student debt, are driven higher. This confluence of events, a sizable population with cost-deferred capital, and decreased market competition due to consolidation of rentals into fewer and fewer hands is unsustainable. Clearly, we need a policy solution that both encourages competition and creates affordable housing.

Pre-Question 9, rent control in Metro Boston had three parts: maximum rents and increases, anti-conversion regulations, and tenant protections. Laws differed by municipality. In all cases, a commission set maximum rents and approved rent increases. Boston and Brookline commissions regularly approved rent increases of 4-5%. Cambridge tied rent increases to inflation. Anti-conversion regulations deterred apartment-to-condominium conversion. Some regulations mandated advance notice of conversion, while others required severance payments and relocation assistance. Tenant protections made it harder for landlords to evict and made the failure to maintain essential services punishable by fine. Together, these functions made up what was referred to as rent control.

Twenty-two years later, housing is more expensive than ever. Skyrocketing rents are driving market prices far above assessed value. Consequentially, entrepreneurs have high barriers to entry into the rental market. Small property owners are bought out and consolidated. It seems Question 9 led to fewer individuals having the means to invest in and own property, a key underpinning of our democracy. Market competition has decreased because of Question 9. The market has been shaped in favor of corporations, not small property owners. In addition, the elimination of rent control means one less bulwark to gentrification for economically vulnerable communities. Homeownership, historically, has been a means of wealth-building and upward mobility, but for many young people, this opportunity has been foreclosed.

Policymakers have three options. First, they can do nothing. The result will be further conglomeration of housing stock, increased prices, and stunted competition. Second, policymakers can increase government subsidy of renters, and, ultimately, the conglomerates that own rental units. Merely increasing subsidies is not sustainable at scale because, as Generation X enters the rental market, and young professionals’ homeownership is impeded, rates of rental will continue to soar. This isn’t sound policy. The alternative is that citizens and policymakers have a real discussion about rent control and related mechanisms. That means dispelling the myth that rent control is inherently anti-competitive and bad for the economy.

A thoughtful discussion on rent control must seek viable solutions for the socioeconomic realities of 2016. We must contend with what Robert Reich, Labor Secretary under President Clinton, says about “the market.” According to Reich, there is no such thing as the “free market.” The market is a set of rules written by politicians and special interests. So, the choice becomes, what kind of market do we want to establish? Who are its winners and losers? If we look to America’s ethos, namely that everyone should have a fair shot, we’ll see that rent control comports better with our nature than the current state of affairs.

By: Nick Croce
M.P.P./M.B.A. ’17
Poverty Alleviation Concentrator