Thursday, September 29, 2016

Rent control and the political dynamic

Often discussion of rent control focuses on the economic impact, but I feel the dramatic change this policy creates in a neighborhood's political dynamic can be more important.

In growing cities without rent control, you have opposing sides shaping policy on development: The pro-density and anti-density sides.

Long term homeowners make up a big part of the anti-density side. People tend to oppose change in general, and this is especially true when change appears to have few benefits. For long-term homeowners, the downsides of new density are readily apparent: more traffic, more construction noise, more people using parks, less sun, more “lesser” people in their neighborhood.

On the other side, you'll find the main pro-density groups: There are developers who want to build and local business that want more customers -- while this group has money, it's not very big. There are also non-local people who want to move to the neighborhood, but given the design of our political system they often have no influence. Instead, the biggest politically influential group in favor of more density tends to be current renters. While more density also means more traffic and more construction noise for renters, it also means lower rent and more rental options-- which is most important to them. This can be a self-feeding loop. Density-friendly policies should lead to even more density-friendly policies as the percentage of renters grows.

The Portland survey on their infill proposal shows this. While it is a self-selecting survey, the findings are still telling. It found: “The most significant differences among demographic groups were between homeowners and renters, particularly concerning housing types. More than 70 percent of renters felt all proposed changes related to housing types were moving in the right direction, while homeowners were more divided. Renters were also more supportive of applying diverse housing types more broadly throughout the city than homeowners.

Rent control divides renters

Rent control, however, splits renters in two politically. Long-term renters who have no plan on moving start to think more like homeowners. For them, more density means more traffic and construction noise with no upside. If anything, they become even more opposed to new development since they have no financial reason to want land values to go up, and allowing new development could mean their rent-controlled apartment building is torn down.

Renters who hope to move in the future --because they are having a kid or hope to buy a house, for instance -- still have a reason to support development, but this is a much smaller political group. It is also a group less likely to be involved in local politics. Splitting renters into these two political groups can shut down the cycle of density-friendly policies.

While rent control does change the investment dynamics surrounding a new building, that is a relatively minor change compared to the dramatic political shifts it creates. It's a policy that shifts the political dynamic around density dramatically to one side.

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