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February 22, 2023
The Greater Boston Chamber of Commerce opposes Docket #0408, a petition for a special law authorizing the City of Boston to implement rent stabilization and tenant eviction protection. The Chamber has deep concerns about the policy and approach set forth in this petition and urges the committee to reject the proposal.
The Chamber agrees with the City that housing affordability poses a major challenge and ardently believes that the way to address it is by increasing housing production and supply. The Chamber vocally supported recent policy efforts to stimulate housing production statewide, including the Housing Choice Act and regulations that set housing density standards near public transportation.
However, the proposed policy overlooks the significant and historical pitfalls of rent stabilization: an overall reduction in housing production, higher housing costs for non-controlled units, and poorer housing quality. The risks associated with these pitfalls are amplified by the petition’s approach to implementing rent stabilization which includes ambiguous, undefined terms and grants broad, undefined powers to a yet-to-be defined entity.
Rent Stabilization Limits Access to Affordable Housing
Housing supply and tenant mobility create widespread access to affordable housing. Rent stabilization limits access by reducing both methods: it chills both housing production and tenants’ willingness to move.
The impacts of imposing rent stabilization on housing production can be seen clearly in other cities that recently adopted rent control policies. St. Paul, Minnesota voters adopted rent stabilization policies in 2021 and in 2022, the first year of implementation, preliminary data shows a stunning 50% drop in housing production, with a several thousand unit housing project also now on hold.[1] The impacts were so swift and so detrimental that the city changed course within six months to exempt new construction and allow for greater increases between tenants, among other changes.
Ultimately, less housing production creates scarcity and raises rents for units not covered by rent stabilization. New York and Los Angeles both maintain longstanding rent stabilization policies, however, even with decades-long policies that limit rent increases, the median rents in both cities rank among the highest in the country.
Rent control and stabilization policies also lead to less tenant mobility, making it harder for new residents to access affordable housing. As tenants remain in rent-controlled and rent-stabilized units – regardless of their income level or financial situation – residents looking to find new housing or potential new residents who wish to move into the city will find only higher rents in non-stabilized units.
These factors – less housing supply and reduced tenant mobility – are proven to create higher housing costs in rent control environments. A 2018 study evaluating San Francisco’s rent control policies after a 1994 change of the law found that rent control reduced rental unit supply by 15% and limited tenants’ mobility by 20%.2 The report concluded “…while rent control prevents displacement of incumbent renters in the short run, the lost rental supply likely drove up market rents in the long run, ultimately undermining the goals of the laws.”[3] The outcome is clear: as a whole, city-wide rents went up, not down.
Rent Control and Stabilization Negatively Affects Housing Quality
Policies that control a landlord’s ability to set rents also discourage investment in and regular upkeep of housing units. The result is the controlled housing stock decays while the non-controlled stock improves, creating sharp disparities in housing quality.
This dynamic played out in Cambridge, MA during its two decades of rent control. A 2012 policy brief from the National Bureau of Economic Research on the end of rent control in Cambridge notes that: “…evidence indicates that ownership investments in rent-controlled units, including maintenance, upkeep and capital improvements, were lower than investments in non-controlled units.”[4]
Furthermore, the proposal as drafted leaves the door open for an oversight entity that would have regulatory authority and the power to determine “fair return standards.” This means that even for owners looking to make property improvements and investments, the City could restrict their ability to recover necessary expenses for building maintenance or ordinary improvements.
Petition Omits Consequential Details
The proposed petition creates the option to grant immense power to an administrator or board that will promulgate regulations to oversee local rent regulation. These include registration, fair return standards, tenant notification, and other potential powers that are undefined in the petition. There are no guardrails that provide a check or balance on the regulatory entity. The petition lays out no details on the regulatory entity’s structure, its span of control, its specific responsibilities, or how the public would interact with it.
There are several missing and consequential details that would have huge implications on the ability for landlords to navigate the outcome of this petition should it move forward, including an administrative process for disputes, how they may or may not recover the costs of necessary maintenance and renovations, changes in local or state tax policy, and legal and communication requirements with tenants.
The petition also gives the City the authority to regulate conversions to condominiums and cooperatives, likely a defensive measure to prevent the shift to ownership that would result from rent regulation. Massachusetts already has a condo conversion statute that provides for certain tenant protections and allows for municipalities to adopt restrictions on condo conversions of rental properties with four or more units.[5] These protections include notice requirements, a prohibition on high rental increases, and a right of first refusal. Boston itself adopted stricter standards, giving tenants five years to relocate if an owner wishes to convert units into condos. It is unclear, and not included in the petition, how the city seeks to further regulate in this area.
Outcomes and Alternatives
A study from the Brookings Institute best summarizes the ultimate outcomes for the City from a rent stabilization policy: “While rent control appears to help current tenants in the short run, in the long run it decreases affordability, fuels gentrification, and creates negative spillovers on the surrounding neighborhood.”[6] The evidence is clear that rent stabilization is not the solution to the region’s housing affordability challenge.
Our city and state are at a critical moment for addressing housing costs, and the best way to lower housing costs is to increase supply in the region. To better serve the city and residents, the Chamber urges the City to focus on faster permitting and better coordination among city departments involved in the development process rather than adopting a high-risk, vague policy that will undoubtedly place a fierce chill on housing production in Boston.
[1] U.S. Department of Housing and Urban Development, State of the Cities Data Systems Local Permitting Database.
[2] Diamond, McQuade, Qian – The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality: Evidence from San Francisco. American Economic Review 2019.
[3] Ibid.
[4] Autor, et al. – Housing Market Spillovers: Evidence from the End of Rent Control in Cambridge Massachusetts. National Bureau of Economic Research 2012.
[5] Chapter 527 of the Acts of 1983.
[6] Diamond, Rebecca – What does economic evidence tell us about the effects of rent control? The Brookings Institution 2018.
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