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Rent Controls, a Bane of Landlords, Are Gaining Support as Costs Soar

Calls for rent-control legislation are growing across the U.S. as apartment tenants endure sharply rising rents and memories fade of the downsides of price caps.

Lawmakers and advocates in California, Illinois and Washington state are pushing to repeal state laws that forbid rent control or place limits on cities’ ability to regulate rent increases.

A similar initiative in Oregon was narrowly defeated last spring. Boston, meanwhile, recently passed a bill that restricts landlords’ ability to evict tenants, although the legislation still requires approval from the state legislature.

From 2000 to 2016, median inflation-adjusted rents in the U.S. jumped 15% to $980, while renter incomes declined slightly, to $37,300 from $38,000, according to Harvard University’s Joint Center for Housing Studies. Some cities, such as San Francisco, Portland, Sacramento and Seattle, have logged annual double-digit increases at various points during the past few years. While rent increases at the high end have slowed recently because of a flood of new luxury supply, increases for midprice properties have shown little sign of abating.

“We cannot build our way out of a crisis of this proportion,” said Elena Popp, founder of the Los Angeles-based Eviction Defense Network, one of the groups pushing for stronger rent-control laws in California, along with ACCE Action and the AIDS Healthcare Foundation. “Expanding rent control is the best way to protect affordability.”

Any moves to impose caps would come as a new tax overhaul takes effect that reduces tax incentives for homeownership. If rent caps are put in place, the balance could shift even more toward renting over buying.

Price pressures have been increasing since the latest recession. Cities from San Francisco to Boston to Chicago have seen an influx of young, educated workers who are eager to rent apartments near downtown amenities. At the same time, there has been little apartment construction targeted to moderate-income residents, partly because of rising construction costs and tight building regulations.

“I don’t blame some people for being upset about [rent increases], but they don’t look at the root causes,” said Douglas Bibby, president of the National Multifamily Housing Council, a landlord group.

Wall Street investors, meanwhile, bought thousands of single-family houses out of foreclosure during the housing bust—although they continue to own a small percentage of the overall stock—and some have been criticized for jacking up rents too aggressively.

California is set to be the largest and most important battleground for rent controls this year. Advocates for low-income residents in less than a month have gathered more than 100,000 signatures out of roughly 365,000 required to put a measure on the ballot in November that would repeal a 20-year-old bill that places statewide limits on rent control.

If that is repealed, California cities would be able to impose rent control on apartments built after 1995 and on single-family rentals, a key issue for advocates who say large private-equity companies bought up homes during the bust and have been raising rents more aggressively than mom and pops.

Sheri Eddings, who lives in a single-family rental in Los Angeles owned by Invitation Homes, said since she has lived in the home they twice have tried to increase her rent by $500 a month over the course of two years. She pushed back and the increase over the next two years is closer to $360 a month. “Right now, renting in L.A. is scary,” she said.

A spokeswoman for Invitation Homes said in the time Ms. Eddings has lived there her rent increases have averaged out to less than 5% a year. “Our rents are set in line with our local markets and are dramatically lower on a per-square-foot basis than apartments.”

The current law also gives landlords the right to raise rents to market each time tenants move out, which owners say is critical because those market-rate-paying tenants subsidize those who have lived there for years and pay significantly less.

Earle Vaughan, president of the Apartment Association of Greater Los Angeles, which has rent control for older multifamily buildings, said in one of his buildings two tenants who pay market rents of $1,895 for a two-bedroom unit subsidize six others who pay $1,200.

“Our small owners get vilified. … I’m the definition of an affordable-housing provider,” Mr. Vaughan said. Without the ability to raise rents to market, “over time you will bankrupt me,” he said.

Landlords plan to oppose the measure by saying the state needs more development, which could help bring down prices. But that may be a tough sell in California, where homeowners and renters alike are often wary of additional density.

“I think at the very heart of this is you have to build and you have to build fast,” said Tom Bannon, president of the California Apartment Association. He acknowledged that idea is highly unpopular.

The beginnings of rent control date to World War II in New York City, when labor and material shortages because of the war meant little new housing was being built and policy makers sought to avoid a rental affordability crisis. An emergency measure to curb rent increases effectively became permanent, though the number of units it covers has declined over time.

Economists generally have a dim view of rent control, which they say restricts supply and drives up rents for tenants who don’t live in regulated buildings.

A working paper released in January by Stanford University economists found that from 1995 to 2012 rent control in San Francisco helped residents in rent-controlled apartments, increasing the likelihood that they would stay at their address by nearly 20%.

But the study also found that rent control hurt the city overall by making landlords more likely to convert their apartments to other uses and deplete the housing stock, leading to a permanent citywide rent increase of 5%.

“Tenants benefited dramatically when they were covered by rent control,” said Rebecca Diamond, an assistant professor of economics at Stanford and one of the authors of the paper. “We don’t really share it as a society.”

In Washington State, lawmakers in the house and senate have proposed legislation to remove a statewide ban enacted in 1981 that forbids local jurisdictions from enacting rent control. The bills aren’t poised to be voted on this year, but Brett Waller, director of government affairs at the Washington Multifamily Housing Association, said he expects them to come under serious consideration for a vote in the next session.

In Illinois, bills have been proposed in the state house and senate to lift the 1997 ban on local rent control ordinances. Voters in some parts of Chicago will also be able to vote in March on a nonbinding ballot question about whether to lift the ban.

“We view it as a serious challenge,” said Michael Mini, executive vice president of the Chicagoland Apartment Association.

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