In a stunning letter to the US Federal Housing Finance Agency this summer, 32 economists debunked the myth that “rent control doesn’t work”. Comparing the debate over rent control to that of minimum wage increases, the economists state that rent controls serve valuable purposes and do not have any measurable effect on decreasing housing supply. Like increases to minimum wages, which have stabilized employees without having a noticeable effect on job losses, the group of economists argues that the old argument has been debunked.
They cite international studies demonstrating that rent control decreases tenant displacement, stabilizes rents (primarily for older people and people of colour), helps people stay close to potential jobs, and does not have any measurable effect on the number of new units built. Jurisdictions that had rent controls and deregulated it were mentioned (e.g. Massachusetts), while a study of 76 municipalities in New Jersey found varying rent stability regulations had little effect on new construction.
“At its core, rent regulations are aimed at rebalancing the power dynamics between tenants and landlords, which disproportionately favor landlords. Through well crafted policies, rent regulations can be designed in a manner that protects the general health and well-being of renters, promotes affordability, mitigates future inflationary episodes, and maintains landlords’ ability to receive a fair and reasonable return on their investment.” (p. 5)
This is sure to send ripple effects through the development community, as we have continually heard this argument in Nova Scotia, which has a temporary rent cap in place but no more stringent renter protections.
It’s also something to think about on National Housing Day. Today’s fall economic update included an increase in the Apartment Construction Loan program to $15 B (but not until 2025) and another $309.3M for new co-op housing–suggestions that might not weather the storm of a federal election. Also floated was the idea of tightening some of the loopholes for AirBnB owners, such as income tax deductions on rental expenses in jurisdictions that regulate short-term rentals. It’s too early to see whether any of these will be implemented, and for renters one paycheque away from eviction, it’s little comfort.