RENT CONTROL PROBLEMS

Realty News - June 9, 1999
New Study Links Rent Control with Deteriorating Housing Stock

New research sponsored by the National Multi Housing Council (NMHC) and produced by Dr. Henry O. Pollakowski of the Massachusetts Institute of Technology Center for Real Estate strongly suggests that under many circumstances rent regulation (rent control) lowers the level of housing maintenance and causes the housing stock to deteriorate.

Using newly-available and improved data from the New York City Housing and Vacancy Survey (conducted by the U.S. Census Bureau), Dr. Pollakowski studies the changes over time in maintenance deficiencies, comparing rent regulated ("rent-stabilized") apartments with unregulated apartments. The report is the first to examine this powerful new data resource and its conclusions provide initial support for the proposition that unregulated rental housing is considerably better maintained than is regulated housing. According to Dr. Pollakowski, "While further research is needed to specify how the size of the regulated "rent break" affects housing maintenance, these initial results are striking."

Among his key findings:

Rent-regulated apartments reported a higher percentage of maintenance deficiencies than non-regulated apartments in a variety of categories. For instance, 29.1 percent of regulated apartments reported water leakages from outside, compared to just 18.1 percent of unregulated apartments. Fully 22.5 percent of regulated apartments experienced heat breakdowns, while only 12.8 percent of unregulated units suffered from such breakdowns. Among rent-regulated apartments, those with resident turnover between 1993 and 1996 were less likely to acquire deficiencies. This is not the case for unregulated units. Since turnover of regulated units is typically associated with allowed rent increases, this result is consistent with the proposition that rent regulation has adverse quality effects. Older dwellings are more likely to have maintenance deficiencies. Pre-1947 rent-regulated apartments have twice the maintenance problems than do unregulated dwellings built prior to 1947. Since older dwellings are more costly to maintain, the housing quality effects of rent regulation may be more substantial for dwellings built before 1947. "This research is important in that it uses new data to examine an issue that has suffered from limited evidence in the past," said NMHC Vice President of Research and Chief Economist Jack Goodman. "With this study, we can see more clearly that rent control may lower rents, but it often does so at the cost of significantly lowering the quality of housing available to residents."

Source: Company Press Release

Based in Washington, DC, NMHC represents the interests of the nation's larger and most prominent firms participating in the apartment industry. NMHC's members are engaged in all aspects of the development and operation of apartment housing, including ownership, construction, management, and finance of such communities.