Laws aimed at improving housing stability had their first readings in Washington’s Congress on January 13. The laws have components including imposing rent stabilization via limiting rent and fee increases to 7%, and increasing tenant protections.
To understand rent control, it should be known that it has the potential to impact the market with how it delimits the supply of new housing and creates a shortage, said Economics Assistant Professor Christopher Clarke.
“Quantity demanded is going to be higher because the rents are lower. Quantity supplied is also going to be lower because suppliers aren’t getting their returns. So they’re not going to invest [and] they’re not going to build, so you get a gap,” Clarke said.
While more recent forms of rent stabilization have not come in the form of concrete price ceilings, these kinds of legislation can still hurt competitive markets like housing due to the distortion of prices, Clarke said.
“[If] the market clearing rent is $1,500, but you’re only allowed to increase it so much, so you can only bring it up to $1,100. You can’t bring it up to the full [amount], but your landlord will,” he said. “Landlords want profits [and] want to maximize their return. Instead of offering it for rent, you can sell it at the market price, so they do that….the supply of rentals declines even when you institute these softer kinds of rent control policies. If you have fewer rentals available, the price of rent is going to go up.”
Considering the execution of this, Pullman Community Development Director RJ Lott said he’s still uncertain whether the city, individual property owners/management companies, or a third-party housing authority would enforce it.
This may be also further complicated by Pullman’s significant student population and the signing of a high number of leases that generally take place around the start of the school year, Lott said.
Regarding implementation in Pullman, it may be useful for situations to be handled between citizens and property management companies, which could ease the process of dealing with all the leases in the city without creating the need for extra manpower, according to Lott.
One of the legislation’s primary purposes is to improve housing stability. While different areas of the state may face these challenges to different degrees, it should be remembered that they, including Pullman, face them regardless, Lott said. “We face challenges that are unique to Pullman and [are] also shared with cities from the rest of the state. For housing, even for year-round residents, there are still challenges to provide [for] them at an economic level that people can afford while being clean and safe.”
According to Clarke, another solution would be to focus on increasing the housing supply. However, with having to deal with bureaucratic red tape, political concerns, and various zoning laws, this may not be the most convenient solution.
“If you want to fix the underlying problem with the market, you have to build more houses,” he said. “I think we can solve 80% of our problem with just private construction – if we made it easier for builders to build, prevented all the red tape that gets in the way…if we just allowed [those] who want to build and the people who want to buy to do what they want to do, it solves like 80% of our problem.”
This may also help deal with high rent prices in Pullman, especially for students, according to Clarke.
“Housing should be cheap here so students aren’t worried about housing…off-campus housing should be a hell of a lot cheaper than it currently is, and we can do that if we build,” he said. “The fundamental issue is less supply relative to demand.”
While the legislation is still in progress, it is hoped that it makes good on assisting those who may be impacted more disproportionately by housing issues. With rent stabilization legislation, there are different perspectives to be considered, One of which is it may help those burdened by inflation, Lott said.
“With inflation over the last few years combined with rising costs of other items, when someone gets a rent increase, it’s hard for them to swallow that extra cost,” he said. “When someone is on the lower end of economic ability…and they hear that their rent is increasing by 20% and they can’t afford to move or can’t afford the rent increase, I think that puts a lot of people in a bad situation.”
Aside from inflation, having to cope with unprecedented and significant increases is a less less-than-ideal scenario, Clarke said. As such, this legislation may prove more beneficial in the short term as opposed to the long term.
“Some of the argument the other way is that everything costs more, including property taxes, maintenance costs, repair costs, those types of things,” Lott said. “It’s a very delicate balance between those who rent and those who are property owners.”
It should also be noted that these policies can potentially do more harm than good, especially for minority groups. This policy often promotes house buying, the benefits of which do not reach the entire population, According to Clarke.
“Young, upper middle class, white people benefit from that because more homes are being offered for sale and they’re able to buy. Those who get hurt are existing renters… it pushes them out,” Clarke said.