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Most of them are in California, New Jersey and New York.
The original rent control law promulgated in New York City, which froze rents at their existing levels, was indeed the meataxe that Friedman and Stigler warned would depress new construction, and it probably did. But over the years it evolved into a “stabilization” program of modest allowable annual increases, which in most recent years have averaged about 3.5 percent. It came to apply only to older units, and whenever most of these acquired a new tenant, they switched from control to stabilization. As of 2017, there were still about 20,000 apartments in New York under strict rent control but nearly a million in the stabilization program. In 2019 the law was revised in a pro-tenant direction, denying landlords the right to jack up rents by 20 percent when an apartment acquired a new resident.
Even a relatively strict law like the one in New York constitutes a strong argument against the idea that rent regulation retards new construction. Mason has written persuasively that it’s “hard to believe that builders are thinking twice about putting up new buildings because of rent stabilization when it hasn’t applied to new buildings in nearly 40 years.”
THERE ARE, HOWEVER, OTHER DEBATES over whether rent regulation is a long-term solution to urban housing inflation. Many of them revolve around the rent-stabilization program enacted in Cambridge, Mass., in 1970. It was a tough law — it imposed a strict monetary cap on increased rents for all the
units in the city and restricted the removal of any unit from rental stock. The provisions stayed in place for nearly a quarter- century, then were repealed in a statewide referendum in 1994. Cambridge residents voted overwhelmingly to keep the law, but it went down statewide by a 51-49 count.
Since the Cambridge law fell, a succession of studies has sought to determine what the impact of that and other rent- regulation regimes actually was. The conclusions are not clear-cut. Most of them have found no significant decline in new construction and have documented clear short-term benefits for the tenants living under regulation, although they detected an increase in conversion of apartments to condominiums, slightly shrinking the number of units in the affordable category.
Perhaps the most comprehensive study, published in the Journal of Political Economy in 2014, reported that the market value and rental costs of buildings rose 45 percent in Cambridge after they were decontrolled, for a total increase in property values of $2 billion. “In short,” the study’s authors wrote, “the policy imposed $2 billion in costs to local property owners, but only $300 million of that cost was transferred to renters in rent-controlled apartments.” That might suggest that the burdens of rent regulation can be an acceptable price for the society to pay.
San Francisco has lived under a rent-regulation regime since 1979. It enacted tough limits —outright ceilings on rents —
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