Guest Blog: To Meet Housing Crisis, Rent Stabilization Needs Fresh Look

By Amy Perruso and Tina Grandinetti

A few of months ago, the UH Better Tomorrow Speaker Series focused on “affordable housing” and, in particular, focused on the work of one Stanford Business School Associate Professor, Rebecca Diamond. One of her arguments, which has been reiterated in various formats over the past few years, is that rent control doesn’t work because landlords “bear the full economic cost” of this form of regulation, and that in the case of San Francisco (the only case she seems to have studied in any depth), rent regulations also “likely fuelled gentrification” because landlords utilized loopholes that allowed them to remove units from the market.

Understanding the low property taxes made possible by Prop 13 in California, and the impact of the tech boom on San Francisco in particular, it does seem dangerous to me to make any meaningful generalizations on the basis of this particular case with so many confounding variables. The social elite already use the argument that rent stabilization/regulation is bad for everyone because it disrupts the “natural’ functioning of the “free market,” but it is also possible to argue that it only fails when loopholes are allowed that give landlords the option to move rental properties to other uses, when landlords are not incentivized to repair and maintain, and when there is no solid regulatory/enforcement regime.

A single study of a city with a unique property market cannot define our conversation on housing, especially because evidence from other cities directly contradicts Diamond’s findings. For example, a 2003 study of New Jersey and California found that cities with rent regulations had 10 percent lower growth in median rents than cities without rent regulations, even when controlling for other factors. And a 2007 study showed that when rent regulation abruptly ended in Boston, Cambridge, and Brookline, Massachusetts, rents in both regulated and unregulated units increased drastically. Ultimately, a broader review of the literature on rent regulation suggests it can improve affordablity for tenants in both rent-regulated units and potentially for those in unregulated units as well.

So, the fact that Diamond was the only scholar invited to speak on this critical issue is troubling, especially when her conclusions simply reinforce the status quo. In fact, in an interview posted to UHERO’s blog, Diamond’s preferred solution to addressing the affordable housing crisis is to implement broader supply-side subsidies to promote the construction of more affordable units. While this is one important strategy, it is also the only strategy that we have been using, and it clearly hasnʻt worked.

The problem is that we cannot simply build our way out of this crisis, particularly when a quarter of home purchases are made by out-of-state buyers. While supporting the construction of new affordable housing units, we must also ensure that existing units remain affordable, and that people are able to stay in their homes. This means that we need to begin looking at new strategies that regulate Hawaiʻi’s obscenely hot housing market and ground it in our local economy rather than national circuits of real estate investment.

Rent stabilization and regulation must be a part of this effort. Particularly because even Diamond’s findings show that rent regulation increases housing stability for existing tenants. And in Hawaiʻi, as more and more of our ʻohana leave for the continent, we value housing and neighborhood stability even more, because it helps to preserve the fabric of our island community.

While rent regulation is a heavy political lift, we can begin by implementing more modest anti-rent gouging measures like those recently implemented in California, Oregon and New York City. These measures address only the most drastic of rent increases—the kind that are likely to put extreme pressure on renters and result in displacement. For example, California caps annual increases at 5 percent, plus local inflation, but not exceeding a total of 10 percent. We could additionally add vacancy controls that cap increases during transitions between tenants.

Across the country, these measures have been championed by on the ground tenant’s rights and housing justice organizers. These are renters organizing for themselves, based on their lived experiences and their own understandings of their needs. It is time we begin centering the voices of those most impacted by housing insecurity, rather than those of the powerful real estate lobby. At the very least, a robust and broadly informed public discussion about rent regulation and stabilization is desperatelly necessary, especially when at least 16,000 families in Hawaii are facing the possibility of losing their housing after the eviction moratorium is lifted.

This conversation has only just begun.