As the ground for the housing crisis has opened, one of the last bastions of stability has also become one of the most lucrative: the rent-controlled apartment market. In fact, it is the lease-controlled apartments that bring in the most cash for landlords — with year-to-year increases usually around 5 percent. Research from the University of Melbourne has found that this financial structure has become so crucial to the present housing crisis that in 90 percent of rental households, there are no alternative, non-rent-controlled options.
The rest are either in a housing crisis or staying in a rental bubble.
Professor Andrew Norton of Monash University, who co-authored the report and is researcher at the United Nations Development Programme, told Marketwatch that the rent-controlled leases have allowed a layer of clients to be left behind, many of whom may have made financially sound decisions to live there but now are homeless because they were unable to escape.
“What we’re seeing is that at a real economic level, a lot of people making long-term rental choices based on rent affordability simply can’t do it anymore,” he said. “The relatively affordable arrangements are disappearing, and renting has shifted from being part of a reasonable housing option into being an intense economic and moral dilemma that’s allowing substandard housing outcomes to persist.”
Rent controls are a relatively recent phenomena, and in the U.S., only 27 states — including Virginia, where the report was conducted — mandate rent control. States with both restrictions on rent hikes and a push for a second phase of rent stabilization for the wealthy can prove particularly detrimental to the rental market. Norton notes that there are some cases of reasonable rent rises, but many renters are stuck in the middle or in poverty, the situations most impacted by rent control’s limitations. “What happens is that the cost of paying rent is getting so high that it is impossible to pay it off and meet the loan repayments of a typical rental in most of the states,” he said. “Instead, people who make short-term rental decisions end up in underpriced housing options.”
States with ongoing efforts to crack down on landlords in what Norton called “Trump-era rent stability” have reached a level of reduced diversity, with some rent-controlled units being completely in disrepair. “Landlords of some of the most desirable properties in the top 10 percent of the income distribution are able to take legal action to prevent these protests,” he said. “You’re seeing corruption at the highest levels, above the one percent.” The study finds that there is no increase in housing supply, but rather skyrocketing demand.
This is compounded by Australia’s immigration rates, with Norton saying that when the numbers of people fleeing war torn countries are factored in, “Australia’s ability to provide low-cost housing in other areas is even more tenuous.” The report urges that the housing crisis be tackled through steps of “active housing policy regulation, legal and tax reform and policy reform,” but Norton cautions, “Reform would be in the form of not allowing rent restrictions, not disallowing rent control.”
Read the full story at Marketwatch.
Thousands of New Yorkers have been left without housing as rent is rising faster than wages
Thousands of low-income seniors face eviction in increasing shortage of rental units
Tired of living in emergency shelters and in vans? You’re not alone.