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Rents across the country are too high. And thanks to the New York City mayoral campaign, debates about how to control them go back to public attention.
Housing is at the heart of the campaign of Democratic candidate Zohran Mamdani, and “rent freeze” is one of its key boards. As Mamdani explains, millions of New Yorkers live in “rent stabilization” homes, where annual increases are determined by the government committee. Mamdani says he wants to stop the annual increase for four years after an incumbent mayor Eric Adams rose 9% a year.
While rent stabilization may feel like the holy grail of tenants lucky enough to get such a deal, experts say how billing a landlord is a dull tool that doesn’t solve the affordable crisis and may make it even worse. The best way to make rent more manageable is that most housing observers believe it is to take a broad approach to overall housing affordability, including Mamdani’s proposed increase in supply and ease local restrictions.
“Rent control reduces costs for some residents, but increases costs for more residents. So overall it’s net negative for affordable prices.” “The most important driver of a home is whether there are enough homes. If there are not enough homes, it creates competition for rare homes. That’s why prices are bids, rents are higher, and a long-term seller market and a long-term landlord market.”
Denver’s Austin has seen rents drop
Such arguments are not merely economics textbook ideas, Horowitz and other observers say. There are several real-world examples of American cities where rents have been reduced as a result of experimenting with increasing supply.
Salim First, an economist who directs urban projects at George Mason University’s Mercatus Center, offers Denver and Austin as recent examples.
In Denver, a surge in new construction as of this summer caused a 6.4% vacancy rate as of this summer and reduced rents, according to landlord advocacy groups. It’s the same story in Austin. In Austin, rents are still above pre-pandemic locations, but below the 2023 peak. (In contrast, New York City had a 1.4% vacancy rate as of 2024, with the latest data available.)
Unintended consequences of rent management
Efforts to control the increase in rents have had unintended but serious consequences, observers say.
Gonzalo Respighi Grasso, a PhD economics candidate at the University of California, Santa Cruz, controlled the focus of his research on rent. He cites a 2019 paper examining the effectiveness of implementing rent management in San Francisco in 1994.
The landlord responded to that policy by converting the rental apartment into a condominium occupied by the owner, or encouraging redevelopment that would allow new construction to be exempt from rent control.
Meanwhile, tenants who lived in rent-controlled homes explained in an interview with USA Today, as they were far less likely to limit their mobility, according to 2019 papers and other studies.
“Many of the existing rental properties were converted to condominium homes and new construction rentals, accounting for high-end owners, so passing rent management ultimately led to housing stocks that cater to high-income earners,” the 2019 paper concluded.
“Rental management actually appears to contribute to San Francisco’s gentrification, the opposite of the intended goal of the policy. In fact, rent management has contributed to the increased income inequality in cities by bringing in higher income residents and preventing ethnic minorities from evacuating.”
Should the government play a role in housing?
Rent management may not be a panacea for hope, but observers agree that given the extent of the housing crisis, a measure of government assistance is necessary.
Nationwide, as of 2023, a whopping half of all tenants were “cost collateral,” the latest available data, spending more than 30% of their income on housing and utilities. This includes 27%, who spend more than half of their income on those expenses. In New York, it is 856,800 households, according to an analysis of urban data conducted by the USA Today Citizens’ Budget Committee.
“Even in a market with many homes, some people can’t afford a decent home,” Pugh’s Horowitz said in an interview. Subsidies such as housing selection vouchers could be solid policy choices for low-income residents, he said.
And Marie Claire Tran Rune, who heads the evictions initiative project in the National Housing Law Project, highlights the importance of tenants protecting as prices skyrocket in many jurisdictions and the federal government pulls back housing efforts.
“Rent stabilization works in conjunction with other tenants protection,” Tran-Leung told USA Today. “In this environment, protection against landlord retaliation is particularly important because the rent that tenants have in certain locations is as good as they are enforced.”
The NHLP and others are also involved in efforts to help tenants access legal representatives in the court system, she said. “We often work with tenants who may have a viable claim against the landlord, but the landlord can easily assert non-payment.”
Contribution: Ignacio Calderon
