If you’ve recently sought an apartment rental in Boston, you know that the search can be a contact sport requiring persistence, flexibility, and a modicum of good luck. According to the Apartment Guide, as of September 2022 and utilizing the long held 30% rule as the basis for calculating maximum advisable rent expenditure, Boston is the second most expensive city in the nation in which to rent. In fact, a salary of $188,000 is required to afford the average apartment in our city.
Boston’s Mayor, Michelle Wu, who ran on a platform calling for the re-establishment of rent control, has moved quickly to make good on her campaign promise. In March of 2023, Wu garnered support for her home rule petition from Boston’s City Council with an 11-2 vote, sending the initiative to the state legislature where it must be passed and signed by Governor Healey before it can be enacted. The specifics of Mayor Wu’s proposal allow rent hikes of up to 6% over the increase in the Consumer Price Index (CPI), or 10% maximum, whichever is lower. Other rental protections are included in the proposal which would prohibit evictions for other than “just cause”. New construction apartment buildings would be exempt for the first 15 years after they are built as would owner occupied properties with fewer than 6 units.
Rent control proponents point to some rents that have increased by as much as 50% or more year over year and overall living costs that place Boston out of reach for many. Beyond the obvious financial hardship that comes with high rents, these advocates contend that the social fabric of city neighborhoods has been adversely impacted. Many tenants simply cannot afford even basic accommodations in their own city. Displaced families suffer the disruption associated with children being forced to change schools and move away from friends due to relocation. Business staffing needs are also more difficult to satisfy given an acute shortage of entry level workers for whom Boston’s rents are unaffordable.
There is now evidence that Boston’s high cost of housing is repelling not only entry level workers but highly skilled talent as well. A recent Political Wire article reports, “It appears in domestic migration data, that years after lower-wage residents have been priced out of expensive coastal metros, higher paid workers are now turning away from them, too.” The New York Times has placed Boston on a list of cities that are losing educated residents. The paper reports, “Boston’s pull with college graduates has weakened. Seattle’s edge vanished during the pandemic. And the analysis shows San Francisco, San Jose, Los Angeles, and Washington all cross- ing a significant threshold: More college-educated workers left than moved in.”
Presently, just six states permit rent control measures, New York and California being among them. Another 30 states have laws specifically prohibiting rent con- trol. The tide has been turning in favor of rent control advocates in recent years, however, with municipalities throughout the country from Portland, Maine to Portland, Oregon approving rent stabilization measures. Portland, Maine now limits rent increases to 70% of the Consumer Price Index (CPI) and conversions from apartment to condominium are subject to a $25,000 levy. Portland, Oregon passed rent control 3 years ago and each year establishes a permissible percentage increase with the increase allowed for 2023 being 14.6%. Though Connecticut, New Mexico. Hawaii, and Nevada have rejected rent control initiatives, advocates in those states are reintroducing proposals amidst a climate that is perceived as being more receptive. The battle is also being waged on the national stage and Senator Elizabeth Warren is one of 50 members of Congress who are urging President Biden to get behind a bill establishing rent protections across the country.
It is fairly well known that Boston adopted rent control back in 1970 after the legislature voted to allow municipalities with more than 50,000 people to do so. Many landlords were not incentivized to maintain their properties, and some fell into disrepair. Abuses were also brought to light with stories of well-heeled Bostonians and politicians living in rent controlled dwellings. This dynamic has been explored by the New York Times in an article titled, “Why Do My Rent-Stabilized Neighbors Own Vacation Homes?” Over the years, opponents effectively communicated their opposition and in 1994, rent control was overturned in a ballot initiative with just 51% of the vote.
Rent control had also been implemented numerous times previously in Boston and throughout the United States. Post World War I, Boston was afflicted by a housing shortage as it is now. In 1920, a state statute was enacted that limited rent increases to 25%. It lasted just three years before being repealed. The Pioneer Institute for Public Policy details subsequent World War II era legislation that was passed by Congress. “In 1942 the 77th Congress passed the Emergency Price Control Act establishing an Office of Price Administration (OPA) which was empowered to designate an area as a “defense rental area”. In Massachusetts, all counties were eventually designated in this way.
After the war ended, Congress extended price control provisions and established a new maximum rent cap every year until 1953 when it expired. The Massachusetts legislature passed a law that year allowing localities to continue the rent control measures if they chose to do so. Most towns and cities opted in. The new law instituted fines for landlords who charged tenants more than the allowed max- imum. Yet, as with the original state law, this law too expired after two-and-a-half years.”
It is natural that the rent control debate would again heat up in the face of the current shortfall in the housing supply as well as growing inequality throughout our country. The impulse to deliver direct relief to impacted households is also understandable. Quite a bit of research suggests, however, that rent control may not be the best way to achieve the desired objective. According to the CommonWealth Non-Profit Journal, “Rent stabilization could actually exacerbate the inequity. A Stanford study found that rent control accelerates gentrification by encouraging landlords to convert rental housing to high- end condominiums or cooperatives. This is already what we are seeing in numerous areas through- out Massachusetts and rent control would reinforce this move toward unaffordable, and gentrified, neighborhoods.” The Brookings Institution has also weighed in on the matter, questioning the benefits of rent control. “Rent control appears to help affordability in the short run for current tenants, but in the long-run decreases affordability, fuels gentrification, and creates negative externalities on the surrounding neighborhood.”
These results highlight that forcing landlords to provide insurance to tenants against rent increases can ultimately be counterproductive. If society desires to provide social insurance against rent increases, it may be less distortionary to offer this subsidy in the form of a government subsidy or credit.” Another unintended consequence of rent control is that it can create a mismatch between residents’ current needs and the homes in which they remain for longer than their needs are actually met. Some middle-class tenants have been adversely impacted by rent control, electing to remain in their rent controlled apartments while foregoing what would have been significant increases in equity they could have realized through purchases they could have actually afforded.
It is far from certain the MA legislature will approve the home rule petition that was passed by the city council. The battle lines have been drawn with landlord groups squarely in opposition. Greg Vasil, CEO of The Greater Boston Real Estate Board explains his position, “The difficulty is doing business in Boston is really hard,” Vasil said. “Developers, landlords, and lending institutions have told us that ‘if we’re in a rent control environment and if there are government price controls in the city on projects, they’d rather be elsewhere.’ And we’re concerned about that, because it’s not going to solve our problem for the people of the city. That’s our biggest issue, I think we are all in agreement on what the housing problem is, I think it’s just philosophy on how we get there is the biggest stumbling block.”
Massachusetts State Rep. Mike L. Connolly is among the many who disagree with this assessment. “We’ve been in a state of affordable housing emergency really for over two decades now,” he said. “Today, a more accurate way to describe the housing issues that we face is that this is a disaster. We have never seen the level of homelessness that we see now in the Commonwealth of Massachusetts,” Connolly added. “We have never seen the kind of cost burden that renters now face.” Connolly, sup- ported by a group of tenant advocates, renters, and local officials, has now filed a petition for a ballot initiative, which may effectively circumvent the state legislature and place the question before the voters. As Connolly sees it, “The public is hungry for action on these issues.”