The debate about rent control — RISMedia

On July 24, the House Financial Services Committee (HFSC) Subcommittee on Housing and Insurance held a hearing on “Housing Solutions: Cutting Red Tape.” The topics and ideas discussed primarily revolved around examining regulatory hurdles and other sensitive housing issues.

A key topic of discussion, however, was rent control, which the subcommittee’s chairman, Rep. Warren Davidson (R-OH), called complex and uncertain and a factor that negatively increases housing costs while reducing supply.

“So instead of working to make things more efficient, federal bureaucrats are working to create more cost and complexity and even more uncertainty,” he said. “For example, in one of their recent projects, HUD and USDA are working on … energy regulations to create another rent control project to standardize multifamily housing.”

Davidson argued that federal bureaucrats “want to focus on anything but the job of building housing” and that “things are not going well in the federal housing programs.” He claimed that there was no need for rent controls or bureaucracy, which he said should limit investment.

“We need more supply,” he explained.

Davidson’s claims follow a recent initiative by the Biden administration in which the White House said it was “calling on Congress to pass legislation giving commercial landlords the choice of either capping rent increases on existing apartments at 5% or risking losing valuable federal tax breaks” in hopes of ending corruption among landlords.

The Biden administration, in turn, claimed that Republicans had “tirelessly” blocked the government’s housing program and tried to cut rental assistance programs designed to encourage home construction and reduce mortgage costs.

The National Association of Home Builders (NAHB) issued a statement to President Biden in July expressing its views on his potential rent cap.

“The NAHB strongly opposes rent caps and believes they would exacerbate the housing crisis by hampering new construction, which would ultimately lead to higher rents. Rent caps would also lead to lower maintenance costs and hurt existing tenants because owners and developers would not be able to cover rising costs if rents were fixed.”

Impact of rent control in the New York subway

According to the New York City Rental Policy Board, rent control, including rent caps, is “generally” reserved for tenants in certain older buildings who have continuously occupied those units for an extended period of time.

However, there are numerous other communities across the state with rent control, including Westchester County, New York, which, like other counties, can decide for themselves whether or not to participate in such measures.

Rich Giaccio is a real estate agent and investment property owner with all of his units located in Westchester County. He is also the owner and president of Prime Payments, a credit card processing company in Katonah, New York.

Giaccio openly admitted that he does indeed raise the rent on his properties, but shared that, like all other landlords in the area, it is capped at 5% annually. Giaccio explained that with each of his properties, “it’s what the market will bear.”

He cites inflation, which has severely shaken the market in recent months, as well as constant property valuations as the reasons for the steady increase in rents.

When asked about his opinion on rent control given the current market situation, he says he would not buy “rent-controlled properties (public housing, Section Eight, etc.)” for his portfolio because he would not “get a better return on my investment.”

“Rent control is great for the people who really need it,” Giaccio said. “Like the elderly and people with disabilities. But it’s also great for city employees, like firefighters.”

California, Oregon, Maine and Minnesota have so far implemented statewide rent control laws, and in addition to New York, New Jersey and Maryland also have laws that give local governments the ability to adopt this rent policy.