Eviction moratoriums have helped some tenants, but what about rent stabilization?

Eviction filings in New Mexico fell off after March 2020, when the New Mexico Supreme Court and the CDC placed moratoriums on the execution of writs for nonpayment of rent, but they didn’t disappear. According to Princeton University’s Eviction Lab, a research project that tracks filings throughout the United States, 15,651 eviction cases have been filed in New Mexico since the pandemic began, with 194 filed last week.

Of course, courts were ordered to pause those cases, so these numbers indicate a potential tsunami of eviction cases that may hit the courts when the state moratorium ends in March. The number of court filings also doesn’t account for the “informal” evictions that took place during the pandemic, which can happen when a landlord places enough pressure on a tenant to vacate, sometimes by calling law enforcement to show up at their door. In many of these cases, tenants simply fold because they don’t have the resources most landlords do to dispute cases in court.

So far, the state has spent about $170 million keeping tenants in housing after businesses closed and laid off workers. A lot of that money went toward ensuring landlords were made whole and could afford to pay their mortgages and cover maintenance costs. More recently, as you’ll read in Sol Traverso’s story this week, New Mexico has dedicated another $2 million to set up a new program allowing struggling tenants and landlords to resolve disputes of rent nonpayment after the state moratorium expires. But so far government officials in New Mexico — the same ones who have continued to pour money into these programs — haven’t adopted a policy that addresses the root cause of at least some of these cases of nonpayment of rent: Unchecked rent increases.

The term most people are familiar with when it comes to keeping rent hikes within reasonable limits is called “rent control,” but this actually refers to policies that place a ceiling on rent. The United States enacted rent control following World War II, when soldiers returned home and started families, causing the demand for housing to dramatically outstrip supply. But when discussing the idea of restricting the percentage increase a landlord can apply to rent at the beginning of each new rental period, the more precise term economists use is called “rent stabilization,” which is an idea New Mexico might take a closer look at.

California and Oregon have both experimented with this type of regulation. Most property owners in California can only impose rent hikes of up to 5 percent each year, plus the rate of inflation. California also requires landlords to provide a “just cause” when evicting tenants. In Oregon, the percentage increase was raised from 9.2 in 2021 to 9.9 percent this year to align with ongoing supply shortages in the housing market following the massive buy-up of housing in 2020 and 2021. The idea is for the policy to move in tandem with the economy, rather than setting a fixed cap on price.

In New Mexico, landlords can raise rents by what they wish. The only rule is that increases must come after a lease period has ended. For month-to-month lease agreements, landlords must provide 30 days notice. This is the reason why — compared to states with rent stabilization policies — rents here and in many other parts of the country were raised by 30, even 40 percent, as the housing market boomed.

One of the common arguments against rent regulations comes from the classic free market, laissez faire philosophy, famously championed by Scottish economist and philosopher Adam Smith: Left alone, market forces of supply and demand will produce a fair market price. But places like Taos County provide examples of how this theory fails to hold up in practice. Here, you can peruse rental listings and find virtually identical apartments within the same neighborhood with drastically different prices. Landlords don’t check a supply and demand curve when setting rent. Sometimes they roll the dice, fishing for a tenant willing to pay a price well outside what the market calls for, and sometimes win that bet, which only drives rental prices up further in an area. See the chapter on greed the next time you pick up a book on behavioral economics.

With our government officials expending so much time, energy and money on temporary solutions to the current housing situation, it might make sense for them to consider one, which, at least in theory, actually keeps prices within range of the market, while still allowing landlords to grow their businesses.