Our nation has never been more focused on the issue of housing as it is today.
In my 30-year career advocating for affordable housing, this is the moment we have all been waiting for: Politicians, policymakers and the public are finally focused on the critical question of how we, as a nation, best meet the basic human need of providing shelter for our citizens. Housing is critical to the economic and social well-being of our country, but we are in danger of losing this opportunity to political pandering and partisan politics.
A recent campaign to try to persuade the Federal Housing Finance Agency (FHFA) to enact what would require multifamily mortgages financed through government-sponsored enterprises (GSEs) to adhere to a rent control regime is a perfect example.
The FHFA oversees Fannie Mae and Freddie Mac, which together backstop the loans behind more than 12 million apartment units in America. Under pressure from activists, and even from some lawmakers in Congress, the FHFA is reviewing a misguided proposal to impose rent control on all apartments with loans backed by Fannie Mae and Freddie Mac. Pro-rent control advocates backed by political and philanthropic organizations are spending tens of millions to boost this failed policy.
Our current housing crisis is the result of decades of broken policy and repeated unwillingness to invest needed government resources in housing. The pandemic then drove the cost of housing way up due in large part to dramatic increases in uncontrollable costs, such as insurance and state and local taxes.
Rent control seems like a fix but feeds a “David vs. Goliath” narrative that disregards the legitimate costs and decades of research documenting its long-term, devastating consequences. Rent control allows politicians to shirk their responsibility by shifting the cost of providing needed housing opportunities to apartment owners for immediate political gain. This hurts current renters and those that cannot even access the rental housing market.
And yet, economists of all political stripes, including some on the left, such as Paul Krugman, acknowledge that rent control is a surefire way to make our housing crisis worse. Rent control discourages builders from building the amount and the variety of homes needed to keep housing costs in check and upgrading existing homes. Over time, it creates a “worst of both worlds” scenario: It widens the shortage of affordable homes while also causing the existing housing stock to decay and deteriorate.
Moreover, rent control is wildly inequitable. It gives the well-off the same access to rent-controlled apartments as lower-income families who need assistance most. It incentivizes every renter, no matter their income or wealth, to stay in their apartment much longer than they otherwise would, even when their apartment no longer fits their needs. This creates fierce competition for a smaller number of vacant units. Studies shows that rent control supports more upper-income and white renters than those of moderate income and people of color.
This isn’t theoretical; the dynamic has been observed time and again in empirical studies by researchers of all political persuasions.
In a now-famous study, a team of Stanford economists found that, in San Francisco, when the city strengthened its rent control ordinance, the supply of rental housing shrank. Faced with rent regulation, many apartment owners chose simply to leave the rental business altogether, converting their rentals to owner-occupied condominiums at the very first opportunity. Then, as the supply of rental housing decreased, rents increased citywide.
More recently, in St. Paul, Minn., we saw how rent control discourages housing production. Voters there enacted rent control in a referendum in 2021. In the year that followed, permits for new housing dropped nearly 50 percent. Meanwhile, in neighboring “Twin City” Minneapolis, leaders chose not to enact rent control, instead using zoning changes to encourage more affordable types of homes and investing more resources in affordable housing. As St. Paul saw new housing plummet, Minneapolis saw permits for new multifamily housing increase by 16 percent. It’s the Minneapolis strategy that’s working, according to reporting from Bloomberg.
There are proven solutions to our housing challenges. At the state and local level, communities have successfully used zoning changes to encourage the creation of new rental housing communities and financial incentives to reuse dead malls and empty office buildings for more housing, just to name a few.
At the federal level, Congress should dramatically increase funding for targeted rental assistance, such as that offered by the Housing Choice Voucher Program. Congress should also expand the Low-Income Housing Tax Credit to increase funding for more affordable housing. And we need a Middle-Income Housing Tax Credit to allow working-class renters to lower their housing costs.
If rent control is harmful at the local level, it will be disastrous at the national level. That’s why a coalition of 18 of the nation’s largest housing organizations representing rental housing providers across the country of all sizes — nonprofit and for-profit community-based resident organizations and those that provide funding for housing — recently sent a letter to FHFA asking that the politically motivated rent control proposal be rejected.
Politicians at the state and local level, such as Colorado Gov. Jared Polis (D) and Minneapolis Mayor Jacob Frey (D), have shown leadership and courage by resisting political pressure to enact rent control in their communities, and instead have paid attention to the data. Now we need federal politicians to be courageous and stand up for practical, comprehensive solutions to create more needed homes, not broad government price controls that limit housing opportunities.
The surest way to solve the problem is to give targeted assistance to those who need it while also encouraging builders to bridge the gap between the homes we have and the homes we need. That means cutting red tape and making federal financial investments in housing solutions that work.
These are all commonsense solutions. Now, what’s left is for policymakers to implement them.
Sharon Wilson Géno is president of the National Multifamily Housing Council.