The Register Citizen (Torrington, CT)
Cap on rent hikes benefits everyone
My goal here is to make one thing plain: A bill that aggressively caps annual rent increases will not only stabilize rent in our state, but significantly improve our economy.
Over the last two years, rents in Connecticut have increased 20 percent on average, and in many municipalities, they’ve skyrocketed even more. I have friends who’ve been given two weeks to start paying 75 percent more each month for apartments that they can’t get maintenance staff to visit for months on end. Meanwhile, wages remain stagnant, outpaced four times over by the rising cost of housing. This disparity is devastating, and not simply in moral terms, in a state where 52 percent of tenants already spend over 30 percent of their monthly income on rent. It’s easy enough to show how economically inefficient this situation is — as the anti-rent cap lobby likes to say, “it’s just basic math.”
Renters make up a third of Connecticut’s population, and over half of them are financially struggling to remain housed. Arbitrary and unjustified rent increases drive up evictions and homelessness by forcing the market to bear a rent price far surpassing the efficient market rate. According to Investopedia, “demand is an economic principle that describes consumer willingness to pay a price for a good or service,” while “supply is a fundamental economic concept that describes the total amount of a specific good or service that is available to consumer.” Fair enough. In general, the price of a given commodity is that which motivates the seller to produce a supply sufficient to meet consumer demand.
This principle gets more complicated when it comes to inelastic goods, which Investopedia defines as “necessities” — things that remain constantly in demand because we need them to survive. Take rental housing, for example. People need places to live, so the demand for housing remains a constant function of population growth and migration. But decades-long efforts to restrict affordable housing construction have artificially withheld supply, such that the constant and high demand for housing pushes prices far higher than they would be in an efficient market.
If Connecticut had a truly free and efficient housing market, contractors would build large swaths of affordable housing as incentivized by the mass of working-class people who hope to continue living in the state without being charged more for rent then they bring in working full time. Instead, the high cost of housing pushes working class renters out of the state, into poverty, or both, while investors and corporate landlords block affordable housing construction.
This is disgustingly inefficient: when people cannot afford to pay the listed price of an inelastic good, it becomes an economic burden on society. Those left unhoused by the insufficient supply of housing often require taxpayer-funded assistance to secure homes, so that their out-of-state investor landlord scan continue raising rates on those who can still be squeezed. Alternatively, people leave their communities in search of affordable housing, taking away their labor and their contributions to the local economy as consumers. Meanwhile, contractors miss out on lucrative opportunities as they are preemptively prevented from building the affordable housing that renters demand.
Now, let’s look at Connecticut of a hypothetical future — one in which a rent cap has passed. Annual rent increases, capped at 2.5 percent, now mirror wage growth. Even before more affordable housing is built, the economy would be
vastly better off in this rentstabilized hypothetical. Evictions and homelessness would be reduced, decreasing displacement costs and subsidies, and providing folks invaluable housing security. When people have stable homes, they embed in their communities, expand their enterprises, and elevate their careers. Without massive rent hikes eating up their disposable income, more is left over each month to spend at local businesses.
This benefits local landlords, as well. Currently, large-scale corporate entities are allowed to drive rents however high they want, and they do so while gobbling up an evergreater market share. This tendency drives rent prices to a level that tenants cannot afford, and smaller landlords are left with a choice to either match an inefficiently high rate and risk vacancies, or to keep their existing prices (and clientele) in the face of rising costs driven by gentrification. If Connecticut goes without a rent cap law, our communities will continue to experience wave after crippling wave of rentflation and renoviction, and local landlords will lose their lower income tenants.
A statewide rent control bill is necessary on economic terms as much as on ethical ones. Everyone — with the exception of hedge funds and slumlords — stands to gain.