Things will change dramatically if Zohran Mamdani gets his way. If the democratic socialist wins the mayoralty next month, as he is expected to do, he says he will push for a four-year freeze on rents of stabilized tenants all over the city.
It’s not a foregone conclusion that Mamdani can move his plan through, because he needs a majority vote from the Rent Guidelines Board, which could bury the idea altogether. But the mayor appoints the board’s members, so it’s pretty likely he could squeeze out the votes he needs.
The real question is how this would change life in the nation’s largest city, and that requires a look at the broader issue of rent control and how it has played out in cities around the country over the past generation.
Most stabilization tenants in New York aren’t acutely impoverished; their median household income is about $60,000. As many as one-tenth of them appear to be earning at least $200,000 a year. But most of the stabilized renters qualify as rent-burdened: They pay their landlords more than 30 percent of their monthly income. It’s the physical units that stabilization covers, not the incomes of the tenants.
Rent burden isn’t just a problem in New York — it’s been estimated that half of all the renters in the country are over the 30 percent threshold. That’s why rent control has made something of a comeback in the last decade. Roughly 300 communities in America have it in some form or other. The Journal of Housing Economics reported last year that “since the 2010s, it is experiencing a true renaissance.”
That may be a bit of an overstatement. It’s true that quite a few rent-control laws have been added to state and city books in the last few years, but they have not been an unqualified success.
In 2021, voters in both of Minnesota’s Twin Cities opted in favor of allowing rent control. St. Paul imposed a cap of 3 percent on yearly rent increases; Minneapolis simply authorized its City Council to put controls in place. St. Paul’s law remains on the books, but the local government keeps watering it down in response to a slowdown in new development that many attribute to the rent cap. This year it exempted all properties built since 2004, as well as new construction, from having to abide by the cap. Minneapolis, which has experienced a steeper decline in new building, has never put a control ordinance in place at all.
Oregon and Washington state have both enacted modest statewide rent control in recent years. Oregon’s law, passed in 2019, limits rent increases on most properties to 7 percent plus inflation as measured by the consumer price index. Washington’s law, enacted just this year, is basically similar. It’s too early to say what will happen to real estate in Washington; Oregon’s law has been the subject of intense debate, but given the phenomenon of large increases in rent for non-controlled units, it hasn’t produced a serious backlash.
I WROTE A FEW YEARS AGO that one sure way to start an argument with an economist is to say something nice about rent control. That has been true since 1946, when Milton Friedman and George Stigler of the University of Chicago pounced on it with a journal article maintaining that rent control led to neglected apartments and unnecessary evictions. That has been the overwhelming consensus of the profession ever since.
The most controversial venture in rent control took place in Cambridge, Mass., which enacted strict controls in 1970 following passage of a state law permitting it. The controls remained in place for nearly a quarter-century, until the law was repealed by a statewide vote in 1994. Residents of Cambridge wanted to keep the law, but the rest of the state outvoted them. Debate over the Cambridge experiment continues to this day. Its demise initiated a significant rise in property values — a boon to property owners but not to renters. Efforts to reimpose controls continue to be introduced in the state Legislature every year; they have not gone anywhere so far.
San Francisco has a rent control regime that covers a majority of the city’s rental units; the annual increase approved by the city’s Rent Board is normally under 2 percent. Some studies have indicated that the number of evictions in the city goes up with rent control, and that the number of wrongful eviction claims increases even more. Washington, D.C., limits increases to an amount based on inflation, but its law is laced with exceptions.
The national evidence is similarly mixed, but there’s little doubt that controls reduce rents, at least in the short run. The Journal of Housing Economics study estimated that the average effect of controls was a price decrease of 9.4 percent, compared to an increase of 4.8 percent on non-controlled units.
WHAT EXACTLY ARE THE DANGERS OF RENT CONTROL, as economists cite them? One is higher rents for uncontrolled units; another is the emergence of gentrification and displacement in some areas; yet another is declining maintenance, as Friedman and Stigler argued back in 1946. A 2017 study of rent-controlled apartments in New York found maintenance problems in 64 percent of the units, although it also found maintenance issues in 47 percent of those not under control.
There’s also the lingering issue of a decline in supply. Developers in Minneapolis largely stopped new rental-building construction after 2021 — they insisted the prospect of coming rent controls was largely responsible. The city essentially accepted those arguments and hasn’t put controls into place.
Opponents of rent control also insist that controls lead landlords to convert rental units to condominiums, stimulating neighborhood gentrification. The decline of condo prices in many areas in the last few years would seem to mitigate this phenomenon, but the evidence isn’t really conclusive.
PUT ALL THIS TOGETHER, and you can reasonably conclude that a flat freeze on rents may not be the best thing to do. It clearly creates short-term benefits for the renters but does encourage neglect of maintenance, as Friedman and Stigler argued 80 years ago. It also may lead to a slowdown in new residential construction.
But that leaves open the question of whether a stabilization regime limiting annual increases to a modest amount is vulnerable to the same defect. Much of Manhattan and suburban New Jersey experienced a building boom in the last decade with stabilization in place. That doesn’t mean stabilization was responsible for the boom — other factors no doubt were involved — but it does suggest that imposing carefully limited rental increase ceilings — 3 percent a year, say, or a trigger tied to inflation — isn’t automatically ruinous. And it does permit significant numbers of existing tenants to remain in their homes instead of being driven out by sudden and unaffordable rent hikes. Even Friedman and Stigler, in their landmark essay, didn’t apply the same level of vitriol to stabilization programs that they applied to flat freezes.
Zohran Mamdani clearly has a case. Rents in New York’s non-controlled apartments have been going up by nearly 6 percent a year, enough to frighten tenants and create a powerful political issue. Keeping that number down through stabilization makes a reasonable amount of sense. But in going for a flat four-year moratorium, he is using a meat ax rather than a precision tool. Meat axes don’t usually work very well in public policy. The available evidence seems to suggest that this one won’t, either.
Governing’s opinion columns reflect the views of their authors and not necessarily those of Governing’s editors or management.
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