Background on Rent Control
During the 1960s and 1970s, state and local governments embarked on an experiment. Costs of living were steadily increasing and major metropolitan areas were unable to accommodate the migration of people into their municipalities. To maintain the supply of affordable housing, governments started passing ordinances to limit the amount that landlords could raise rent. Unfortunately, these experiments failed to meet the objectives they set out to address.
Typically, municipalities’ rent control ordinances would place a ceiling on rent increases and surcharges of the existing rent. Where landlords made substantial improvements on the property, they were still limited in the amount that they could increase rent for the unit, therefore, property owners discontinued or delayed improvements on the land that they owned. Residents in these cities quickly recognized their mistake and the problems rent control caused.
As so many individuals were migrating into major metropolitan areas, they found that it was rather difficult to find a place to live. This is because rent control ordinances tended to protect the old or current residents at the expense of the new residents. Whereas individuals who already occupied a given tenancy benefitted from lower costs, those attempting to move to a particular area had increasing difficulties finding housing that was available and affordable.
By imposing a price ceiling on future rent increases, the government only harmed the housing markets. These ceilings maintained pricing below the equilibrium point, i.e., the point where housing providers’ supply meets current and prospective tenants’ demands. In competitive markets (absent controls on pricing), when the demand for a good or service is higher than the amount supplied, prices naturally rise to eliminate the shortfall in demand. However, by maintaining these rent ceilings, a market shortage results and the artificial controls prevent rents from reaching levels to equalize the market. Because of these ceilings, many landlords were unable to pay their mortgages because often the rent they were receiving was too insufficient. Worse yet, the quantity of housing available decreased, as did the quality of the units that were available.
Landlords were increasingly disincentivized from making any capital improvements on their land because the amount that they could increase rent would not offset the amount that they paid into the improvements, or at least severely restricted the margins to recoup their costs. As housing prices remained artificially low the demand for housing increased, which meant that less housing options were available for those with limited incomes. Further, as some areas of the cities maintained low housing prices, the prices in surrounding areas typically increased.
With one portion of the housing supply controlled, the excess demand spills over into the noncontrolled sectors.
Moreover, since landlords’ margins on occupied units were so thin, they looked toward newly vacated units to recoup their profits, charging new tenants more than current tenants. This disincentivized both land owners and builders from maintaining current buildings and erecting new buildings. Existing buildings fell into states of disrepair and some were even abandoned. Areas that desperately needed revitalization did not get it because prospective profits for owners were nonexistent.
Not only was rent control bad for landlords, but it also negatively impacted tenants as well. Price controls prevented tenants from moving to other areas because there was no housing available. Tenants found it harder to vote with their wallets (by moving to units located in better neighborhoods or into units of higher quality than their current unit) because landlords were already voting with theirs. Rent control exacerbated segregation of racial minorities and prevented low income tenants from being able to find affordable housing.
Rent Control Fight Coming to Washington
With the election of a Socialist City Council member in Seattle in Kshama Sawant and her successful championing of the $15/hr minimum wage in Seattle, she has turned her sights to rent control. She has argued that rent control is needed because working families can’t afford to pay rent in Seattle.
Additionally, Frank Chopp the Washington State Speaker of the House, and arguably the most powerful man in the legislature has recently come out in favor of revisiting the discussion of removing the Washington State prohibition on rent control. This is a scary proposition for ALL landlord in Washington, especially manufactured housing. This is going to be a hotly contested issue this year and in years to come in Olympia with the legislature. Low income housing advocates believe that it is rent control that can turn the tides in Seattle and other metropolitan areas to bring rents down. The problem that they fail to address is that home and property prices are not coming down in those areas and implementing rent control will only serve to provide less affordable housing and that which is provided will not be able to be maintained.
What Landlords Can Do
The Manufactured Housing Communities of Washington (MHCW) is working hard in Olympia to maintain the law prohibiting rent control in Washington. Their lobbyists have met with more than 40 of the key decision makers in both the Washington State House and Senate and have championed the message that rent control is NOT good for Washington and our working families.
This may be the biggest potential issue to affect Washington landlords in decades and it will take everyone to successfully defend against rent control. All landlords need to be involved in this fight and make sure that their voices are heard. Ask for more information and become part of MHCW and learn how you can make a difference. Every landlord has two House Representatives and one Senator that represent your district and everyone should be contacting those members and educating them on the dangers of rent control and voicing their strong opposition.
If you need more information about what you can do to help fight rent control in Washington, please email firstname.lastname@example.org or email@example.com for more information about how to become involved, how to become a member, and the many benefits of membership in MHCW.