Mayor Wu's Rent Control Plan Modeled on Portland, OR

Rent Control is a government program that limits annual increases on rents, with an aim on keeping costs reasonable for tenants. Almost all rent control programs are municipality-based and exist in cities and towns in New York, New Jersey, California, Maryland and Washington, DC. In 2019, Oregon instituted a statewide rent control law, limiting annual rent increases to 7% + the consumer price index. Now that the CPI is high, that means rents can be raised by 14%, which is unaffordable to many tenants, particularly in the urban areas of the state, where rents are already higher than in suburban and rural areas. Portland, OR in particular has a significant homeless population and the increased rents are driving people to live in tents and their cars when they can’t afford the increases.The Boston Globe recently ran an article about the Oregon situation and interviewed a 70 year old woman who works and receives Social Security. Her rent for a basic, rent-stabilized, two-bedroom apartment in Portland is about to be raised to $1,400 and she can’t afford it. She is contemplating moving into her car.When the Oregon law was passed in 2019, the CPI was nowhere near the 7% it is today, and housing advocates didn’t foresee the increases getting so high. Landlords did, however, and warned that initial bill was a foot in the door for even stricter rent caps. This year, the Oregon Legislature is considering a lower cap: 3% plus CPI or no more than 8% annual increase, whichever is lower.Opponents to rent control say that what’s needed is simply more housing and that if there was more supply, demand would be sated and there would be price points for people all along the market. Landlords and developers say that limiting rents limits their profits, which limits what they have to invest in new housing.Median home prices in Portland Or have tripled since 2000 and there are now at least 5,200 people who are homeless, many sleeping rough in tents. It’s a scale of housing crisis that has not been seen in the Greater Boston area, perhaps because the median rents are so much higher in metro Boston. Many of those who can afford to live in Boston can afford the rental increases and those who can’t are still earning more than low and middle-income renters in Oregon. Perhaps some of the 100,000 people who left Boston moved West, where apartments are relatively affordable. The chart below shows the rent increases in the two cities over time, including when the rent control measure came into effect in Oregon. The Oregon housing bill that contained the rent restrictions also loosened zoning laws, allowing multi-families to be built on what were single-family lots and also allowing ADUs, which permit the owners of single-families to create rentable units in their backyards. Developers can also fit more units on one lot, even if they feel the rents they get can’t be raised as much as they’d like.Boston’s Mayor Wu is attempting to institute rent control in the city. Her plan would limit annual rent increases to 6% plus the CPI, but with a maximum hike of 10%. The first 15 years after construction would be exempt from the rent controls, just like in Oregon and small, owner-occupied apartments would be exempt. There are no zoning changes built in to the law she proposes. Boston housing advocates mostly support Wu’s proposal (some say it doesn’t go far enough), but the business community unsurprisingly does not, for all the same reasons given in Oregon: it will stifle growth, landlords and developers won’t be able to build, and the free market should set the rent. Developers and housing advocates agree that building more will naturally stabilize rents down-market. Some apartments are subject to bidding wars and there are certainly tenants out there who can and will pay top dollar for those pricey Boston apartments. But nearly every day there are news stories about working people leaving Boston because they can’t find a place to live that they can afford. The median per capita income in Metro Boston was $92,900 in 2022, according to the US Bureau of Economic Analysis, whereas in Metro Portland it was $68,374.The graph below shows what an annual increase on a $2,000 apartment would look like under various models of rent control:        Rents in Boston and Cambridge are the highest in the state, with a median asking price in the Back Bay/South End hitting $3,940 in the last quarter of 2021 (the most recent data available). Prices have undoubtedly risen since then, meaning many median rents are topping $4,000. But with a median per capita income of over $90,000, those rents are easily affordable for some.Pro-affordable housing critics of rent control say that because there are no income restrictions on rent controls, more affluent people will “scoop up” lower-cost units in order to benefit from limited rent increases. Economists warn, however, that rent controls can fuel gentrification “by driving up rents in uncontrolled units or pushing landlords to convert apartments into condos” Rent control in and of itself doesn’t seem to have an impact on production, according to experts. The lag in new development in Greater Boston is due to high interest rates, and rent controls probably won’t further depress production. But it also doesn’t create production. As quoted in the Globe,  rent control “doesn’t create an incentive to build, or make it easier to build,” said Jenny Schuetz, a senior fellow in urban economics at Brookings Metro. Building more housing is “the only solution” to the housing crisis, she said.