Oregon made history in February 2019 by becoming the first state in the union to enact rent control nationally. However, an entirely foreseeable unintended consequence is that single-family home values are also likely to decline.
The issue of workforce housing for those who would otherwise be priced out of the market. One that communities all over the country debate.
Higher- and lower-priced housing tends to cluster in a free market.
It causes problems for low-income workers who must live far away from their places of employment, putting a strain on the city’s resources.
Rent control is one of many tools used by cities across the country to address this issue.
On the other hand, Cambridge, Massachusetts, should be at the center of the rent control debate.
It is due to its history, not its size or prominence.
Abolished Cambridge’s rent control overnight in 1995.
Since then, research conducted in the region has provided a window into how a community can change. Due to the removal of rent control and how the imposition of rent control can have unintended consequences.
We can infer the following context and conclusions from what occurred in Cambridge.
What Caused Cambridge to Remove Rent Control?
They provided historical context, noting that implementing Cambridge’s rent control during the post-war housing boom made the Boston area more accessible to apartments.
Landlords put rent control on local ballots to get rid of it in the city at the beginning of the 1990s; the area’s predominately rental population repeatedly defeated them.
Rent control didn’t become illegal until a state-wide vote in 1994, at which point it abruptly vanished in Cambridge.
It presents a new set of metrics to examine and understand precisely—the price of the house, the selling date, and the price paid for its square footage. And the more considerable impact on the community is all graphed to show what was happening.
When rent control is removed, the value of single-family homes rises.
When lifting the rent control in Cambridge and the surrounding areas in the late 1990s, there was a significant increase in renovations and property value increases.
The fact that higher rental streams were being produced in buildings where implementation of rent control is particularly telling.
These include owner-occupied homes, single-family homes, and condominiums.
An additional $2 billion in property value was created in Cambridge over the ten years following rent control’s end. Most of this value comes from sources that were never subject to rent control.
Residents of homes that are exempt from rent control but are still in rent-controlled areas suddenly noticed a sharp increase in the value of their homes. It is mainly attributable to the fact that neighborhoods are improving, and investors are starting to upgrade existing homes without restrictions from the government meddling in free-market economics.
Conflicting Points of View
Advocates for tenants are quick to point out that this is evidence that, in the absence of rent control, property values rise and overall costs of living increase.
Not at all incorrect.
However, proponents of free markets will point out that eliminating rent control also gave value to innocent homeowners and those looking to relocate by removing the area’s housing shortage.
Many people might have had the means to pay these higher rents but couldn’t find housing in Cambridge.
The removal of rent control made this possible.
In Cambridge, the discovery of rent control removal reduced crime in these areas.
Furthermore, there were demographic shifts.
For example, more students moved to Cambridge after the implementation of rent control.
Families with children and retirees started to decline, but other demographics did not.
Why does it become like this?
According to one theory, finding a better situation for yourself suddenly made a lot more sense, and permitting another group to move in. Suppose you had grown up in a rent-controlled apartment as a retired person with kids. But now found yourself “over-housed” and dealing with higher rent prices.
Surprisingly, overall demographic changes were not particularly pronounced.
It can be discovered from a different view standpoint.
After the elimination of rent control, property values increased, allowing Cambridge to profit significantly.
The first method was to increase valuations, resulting in more property taxes without raising taxes.
The residential, commercial, and industrial property taxes have varying rates.
It implied that lower property tax rates had always been available to the neighborhood, and the removal of rent control accelerated this trend.
In what way?
Cambridge could lower property tax rates to minimize the impact on residents while still enjoying increased revenues, thanks to increased revenues from increased property valuations.
Consequences for Oregon
It’s interesting to note that many of the effects of rent control are unintended, as is frequently the case with well-intentioned legislative action.
Rent control is a simple tool that affects unaffordable areas and may not always target the right people.
San Francisco is an excellent example.
One in every five renters in rent-stabilized areas earns more than six figures.
It is because rent control has little to no means of testing; there is no way to require residents to submit tax returns to demonstrate that they cannot afford market rates.
Rent control prevents supply and demand dynamics in a free market from interacting naturally, and only a tiny percentage of those who genuinely need assistance receive it.
Furthermore, as property values fall across the board and neighborhoods stagnate over time, homeowners in rent-controlled areas also suffer as their homes’ values are depressed.
Personal views on rent control. Whatever do you believe is the best strategy to address the affordable housing crisis and incorporate information from studies on rent decontrol in Cambridge. It will help us gain a deeper understanding of the issue and help us make better decisions for our communities and the greater good and benefit everyone.
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