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Are rent caps a good idea? Show more Show less

Rent caps, which set limits on permissible rent charges or cap annual rent increases during tenancies, have been adopted by many cities as a way of curbing rising rents. But do rent caps actually work? Do they keep city rents affordable? Or are they part of the problem?

No, rent caps are not a good idea Show more Show less

Rent caps fail at their basic function of keeping rents affordable.
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Rent caps disadvantage new renters

Rent caps overwhelmingly favour existing renters and disadvantage renters entering the market.
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Context

San Francisco expanded existing rent caps in 1994 to control rapidly increasing rents. Research shows that they benefitted those that were already renting, but severely handicapped new renters entering the rental market.

The Argument

Between 1994 and 2010, renters in San Francisco collectively saved $2.9 billion in rent hikes. However, those who came to the city and started renting after 1994 paid an additional $2.9 billion in rent across the same period.[1] This is because rent caps prohibit landlords from raising rents by a significant margin for existing renters, but do not prohibit a landlord from charging new renters higher rates. This means that those that benefit are usually older, established renters, while younger, new entrants to the rental market are overcharged to offset landlords’ lost revenue.

Counter arguments

This argument only applies to rent caps that limit rent increases. It is not valid against absolute rent caps that limit how much rent landlords can charge, both to new tenants and existing tenants. These forms of rent caps do not disadvantage new renters and ensure the benefits of rent caps are more evenly distributed between established and first-time renters.

Framing

Premises

[P1] Rent caps prohibit landlords from raising rents on existing tenants but does not prevent them from charging new tenants what they want. [P2] This leads to landlords passing costs onto new renters. [P3] Therefore, rent caps disadvantage new renters.

Rejecting the premises

[Rejecting P1] Absolute rent caps set limits on what landlords can charge new renters.

Proponents

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Further Reading

References

  1. https://www.gsb.stanford.edu/insights/rent-controls-winners-losers

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This page was last edited on Monday, 20 Apr 2020 at 12:50 UTC