New study says rent control doesn’t discourage new housing

New study says rent control doesn’t discourage new housing

October 10, 2018

The USC study, sponsored by the California Community Foundation, suggests that rent control tends to keep rents lower even in uncontrolled buildings, helps preserve housing and community stability – and has little discernable impact on the construction of new housing.

The study’s authors are not economists. The lead author, Manuel Pastor, is a sociologist. The two other authors, Vanessa Carter and Maya Abood, are urban planners.

But unlike the Stanford economists who put out a complex study on the economics of rent control, complete with equations that almost nobody can understand, the USC report looks at the existing literature on rent control.

There’s quite a bit of it, and much has been cited badly or used in inaccurate arguments.

The USC researchers are all about moderate rent regulations, including rent controls that exempt vacant apartments. But they suggest that different solutions are appropriate for different cities. And the most important argument they make, in the context of the Prop. 10 campaign, is that rent control does not discourage new housing:

On balance, new housing supply is more influenced by cyclicality in the local economy and other local conditions than rent restrictions (Arnott 1995; Gilderbloom 1981).

Gilderbloom and Ye (2007) used regression analysis of 76 New Jersey cities with rent stabilization and found that there was little to no statistically significant effect of moderate rent control on new construction after controlling for population, racial demographics, population change, income, the percentage of units that were renter occupied, vacancy rates, and unit age. Similarly, Sims (2007), in an analysis of Boston, Cambridge, and Brookline, MA, found that while building construction permits did rise after the repeal of rent stabilization in 1995, multifamily building permits actually reached their height in the mid to late 1980s—during rent stabilization.

This should be obvious to anyone who understands the economics and dynamics of housing development in the United States today.

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