Experts say rent control doesn’t help cities

Sixty-three percent of real-estate experts surveyed by Zillow said rent-control ordinances create more problems than they solve and an additional 33 percent said such ordinances may be effective in a crisis but should be a last resort.

The Seattle-based online real-estate company said it asked 107 economists and housing-industry professionals from across the country about rent control as part of its quarterly home-price expectations survey, conducted between July 27 and Aug. 7.

The respondents were mostly economists at real-estate companies and financial firms. There were also a number of university professors who teach finance and economics.

Zillow’s chief economist, Svenja Gudell, was one of the experts who said rent-control ordinances may be effective but should be used only in a crisis.

Gudell wasn’t surprised that a majority of the respondents objected to rent control, she said. That’s long been the dominant view among economists, and Gudell said she mostly shares it.

“I agree that rent control isn’t a good long-term fix,” she said. “But I can also see that in an absolute emergency where you have to do something in the short-term, rent control can provide affordable housing to a subset of people for a period of time.”

Washington law prohibits cities from enacting rent regulations, but the Seattle City Council is now weighing a resolution asking the state Legislature to lift that ban.

Councilmembers Kshama Sawant and Nick Licata, who introduced the resolution earlier this year, say the city should be allowed to consider adopting some form of rent regulation as part of a broader effort to make housing in Seattle more affordable.

Councilmember John Okamoto, who will take up the resolution in his housing committee next month, has argued officials shouldn’t be spending energy advocating for a tool that may not work and for permission that the Legislature is unlikely to grant.

Seattle rents were up 12 percent in June compared with last year, an increase that put Seattle in 10th place nationally when it comes to how fast its rents are rising, according to recent Zillow research.

Earlier this month, the company’s researchers reported that an average Seattle-area tenant can expect to spend about 32 percent of his or her monthly income on rent.

Zillow asked the experts to chose among four views. While 63 percent agreed rent-control ordinances are always ill-advised and 33 percent said they should be used as a last resort, only 2 percent said they are usually effective and should be permanent.

Another 2 percent of the respondents said rent-control ordinances should be enacted immediately in emergency situations, but only on a temporary basis.

Gudell, the Zillow economist, said she objects to rent regulations in the long-term because they can discourage property owners from building new housing and cause landlords to skimp on maintenance and repairs. Seattle needs more housing, she said.

But she said the city “is probably close to, if not already in, a crisis situation,” with low-income tenants having an extremely tough time.

“Rents have been shooting up like crazy in Seattle and incomes aren’t keeping up, so in that sense we’re in a dire situation that warrants looking at rent control,” she said.

There are various ways to regulate rents, some potentially more effective than others, she said.

Dean Baker, co-director of the Center for Economic and Policy Research in Washington, D.C., was among very few respondents who said rent-control ordinances usually work. Baker said such ordinances can help maintain integrated neighborhoods.

“You can create more housing, but there will always be a limit,” he said. “People in Seattle won’t want to see high rises everywhere. You’re only going to allow so much housing to be built, so allowing rent regulation of some sort isn’t obviously stupid.”

But Gudell warned against Seattle enacting a rent-control ordinance and then keeping it on the books. She said tenants should press officials for long-term solutions.