As the return of rent control initiatives grow across the county, a new Columbia Business School study shows that expansion of rent control and traditional housing policies leads to greater access to affordable housing and increases well-being, according to a release.
According to a new study by Columbia Business School Professor Stijn Van Nieuwerburgh, the expansion of rent control can be a valuable policy tool and increase the welfare of a city. It also reduces housing inequality, benefitting low-income households especially.
The study also finds that there are large welfare benefits from relaxing zoning restrictions in city centers.
Rent control a growing discussion across the country
As both the cost of living and the wealth gap continues to rise in cities, traditional affordable housing policies are receiving renewed attention across the country as an option for policymakers to help residents cope with the high cost of housing, according to the release.
The findings come as policymakers in urban centers are under increased pressure to find affordable housing solutions as the rise in average rents continues to outpace inflation and incomes.
While Oregon was the first to pass a state-wide rent control bill, California residents voted down a 2018 state ballot initiative that would have opened up cities and towns to institute new rent guidelines by repealing a statewide ban on rent-control policies. However another rent-control vote in California may be coming as the members of the AIDS Healthcare Foundation (AHF) and their affiliated PAC, Housing is a Human Right, announced that they had filed to place a new rent control measure the 2020 November California state ballot
“In a world with rising urbanization, the high cost of housing in cities has surfaced as a daunting policy challenge in cities around the country and the world,” said Professor Van Nieuwerburgh, the Earle W. Kazis and Benjamin Schore Professor of Real Estate, in the release.
“Households of different ages, incomes, and wealth are affected differently by changes in policy, but our study finds that as policymakers continue to try to expand affordable housing, rent-control policies can be a useful tool and a bulwark for residents struggling with the cost of living in the face of rising income risk.”
Study says rent control does not lead to decline in quantity of housing
The new research debunks conventional economic wisdom, finding evidence that rent control does not lead to an overall decline in the quantity of housing, according to the release.
The research also finds that the overall positive impact of rent control – reducing inequality and providing a source of stability for households who face a decline in income – more than compensates for any loss in market efficiency due to higher housing and labor market distortions.
Van Nieuwerburgh and his co-authors University of British Columbia Assistant Professor Jack Favilukis, and New York University doctoral candidate Pierre Mabille, define rent control as any government-provided or regulated housing. Rent stabilization and rent control apply to a small number of states around the country, and although it is permitted in 37 states, it has an outsized impact in Los Angeles, New York City, San Francisco, and Washington, D.C.
The study focused on New York City and looked at rent-controlled housing units, public housing, Mitchell Lama housing, and all other government-assisted or regulated housing.
“Economists typically have taken a narrow view towards rent control, preferring other options like vouchers for low-income and rent-burdened residents because they cause less distortion to the housing market. But we’ve found that expansion of rent control in major cities provides real benefits,” said Van Nieuwerburgh. “Better targeting of rent-controlled housing units towards the lowest-income households can amplify these benefits.”