In voting against a bill to cap rent increases, state Sen. Annette Cleveland, D-Vancouver, has opted for common sense rather than political expediency. Other lawmakers in Olympia should follow her example.
Cleveland was the only Senate Democrat to vote against the bill, which would place limitations on annual rent increases. The latest iteration of House Bill 1217 — which now returns to the House — would cap increases at 10 percent plus the consumer price index.
“While well-intentioned, this bill won’t stop runaway housing costs for families in Southwest Washington — it will make them worse,” Cleveland said in a statement.
On the floor of the Senate, she noted that studies indicate that artificial rent control results in fewer developers and landlords entering the market.
“Most frustrating of all, many experts disagree with this policy. We trust scientists on climate and doctors on health — why not economists on housing?” she said. “This is especially urgent in Southwest Washington, where growth and spillover demand are rising. Just across the river in Oregon, housing construction has slowed as shifting policies and rising costs have made the market less certain due to rent cap policies. We risk repeating those same mistakes.”
Oregon enacted statewide rent control in 2019 and currently has a cap of 10 percent. The impact of that legislation has not been widely studied, but actions in other jurisdictions have drawn the ire of economists.
Stanford University’s Rebecca Diamond has written: “Rent control appears to help affordability in the short run for current tenants, but in the long run decreases affordability, fuels gentrification, and creates negative externalities on the surrounding neighborhood. If society desires to provide social insurance against rent increases, it may be less distortionary to offer this subsidy in the form of a government subsidy or tax credit.”
And famed Swedish economist Assar Lindbeck reputedly said, “In many cases rent control appears to be the most efficient technique presently known to destroy a city — except for bombing.”
That might be a bit of hyperbole, but the thinking behind it is clear. Rent prices should be driven by the free market, allowing for prices to be set by supply and demand as well as inflationary pressures. When government limits rent increases, it reduces profit margins for developers and reduces the amount of construction. This exacerbates housing shortages, resulting in homelessness and rent increases that are marketwide rather than in select areas.
On top of that, rent caps limit the ability of landlords to adjust for increased costs. Inflation, combined with government regulations, can bump up the costs of managing and maintaining a property. This drives local landlords to leave the market, selling their properties to conglomerates and removing economic activity from the local community.
Unlike her fellow Democrats, Cleveland has embraced a broad understanding of the issue rather than a myopic focus on the needs of renters. It is clear that quickly rising rental prices have contributed to homelessness throughout the state, but it is equally clear that the long-term solution is an expansion of the housing supply.
Tax breaks, grants and access to low-cost financing can be used to incentivize the construction and maintenance of rental units. So can collaboration with municipal governments to promote construction. Compared with well-intentioned price caps, those actions would do more to enhance the lives of Washingtonians and protect renters.
