Oregon, Los Angeles, Palo Alto... this is how rent control has worked in the US


Oregon, Los Angeles, Palo Alto... this is how rent control has worked in the US

Spain is experiencing the first stages of the Housing Law which, for the first time, contemplates concepts such as rental price control, which have been applied for decades in other countries.

The new regulation has not yet begun to be discussed in the Congress of Deputies, although the Government has urged that it be processed urgently. A requirement that is marked by the times to which the Executive itself has committed, which wants the Law to be approved before the end of the year. The reason, which has been promised to Brussels as part of the sealed requirements to receive European funds.

It will be then, once the law is approved, when the timer will start to design a new price index, which makes it possible to measure and control rent increases in areas with more upward pressure on rents. An index that has to be ready, at most, in 18 months from the approval of the Law and that, at the moment, the Government does not yet know how to structure.

It will not be a global price control, but will have different limits, which will limit its application. The first is that it is only planned for those areas with income pressure, called stressed -with rises of five points above the CPI- and only for large owners -companies and funds- that have more than 10 properties. These are the ones who must link the prices of real estate to that future index.

The second, which will only be applied in those autonomous communities that decide to declare stressed areas and, therefore, it will be the regional governments who have the upper hand when deciding whether there is price control.

With these limitations, the effect of the index and the control of future rents paid by tenants in these areas is unknown. An equation that can be guessed based on what has happened with other experiences, in those countries where there is more development in this area. For example, in the United States.

In fact, the Tenants Unions highlight the analyzes of its implementation in territories such as California, to urge the implementation of a "more consistent" price regulation than the one outlined in the draft that has reached the Congress of Deputies .

"Empirical evidence shows that rent control manages to reduce the rental price in the regulated part, while it can rise in the non-regulated part", indicate both the Sindicat de Llogateres as the Union of Tenants and Tenants of Madrid in the arguments that have been presented to the Ministry of Transport, Mobility and Urban Agenda to modify the current draft in its processing.

"However, when the free part represents a small fraction of the total housing stock, the impact on the average rent is negative. In addition, rent control can also stop gentrification processes and the expulsion of some vulnerable groups," they argue. both organizations.

The premises of the tenant unions are based on different studies in North American cities. Policies focused on both coasts and not generalized.

The non-governmental organization Urban Institute, which seeks greater social equity, explains that price control in the United States has had two 'waves'. The first, in the 1920s and the second, from the 70s. Specifically, it points out that in 2019 only four States (California, New York, New Jersey and Maryland) contemplated different types of rent control, to limit the climbs. Although in the last two years, with the pandemic, there are more initiatives.

One of the states with the longest travel is California. A study published by the Stanford University analyzed the effect of rent control in San Francisco during the 1990s, when increases in certain properties were limited, depending on their year of construction. He concluded that, on the one hand, the turnover of tenants, especially of racial minorities, was reduced. On the other, it had an effect of reducing the supply of rental housing.

In the same State, a study by the University of California shows how in the town of Palo Alto, in 2010, a Rent Stabilization Board was set up to determine, depending on each property, a percentage of price increases. In this case, the study indicates that the average increase in prices, with that meeting, was 2.3% and that it did not have a direct impact on a decrease in supply.

aside, The Haas Institute for a Fair and Inclusive Society at UC Berkeley also analyzes the situation in California and concludes that rent control policies can provide "a cost-effective, immediate and widespread price stabilization solution" that must be accompanied by an increase in the number of homes, especially affordable ones .

This analysis cites, for example, research by UCLA professors William Clark and Allan Heskin on the city of Los Angeles before 1995, which found that tenants whose rents were capped for three to five years had rents up to 30% below market prices and that, for those who had been in the same property for up to ten years, the reduction reached up to 36%.

"Some studies have found that cities with rent regulations ... had slightly more affordable rents compared to units in cities without price controls." "A recent study of the effects of rent control in San Francisco [el citado de la Universidad de Stanford] found that the benefits to tenants averaged between $2,300 and $6,600 per person per year.

As for the current situation, Jen Butler, spokesperson for the National Low Income Housing Coalition (NLIHC) - an association that seeks solutions to the housing problems of low-income citizens - explains to elDiario.es two different current strategies.

Oregon, for example, has recently pushed for rent stabilization, which limits rent increases on older buildings to no more than 7% above inflation. "An example of a more restrictive policy is the new rent control in St. Paul, Minnesota, which limits annual rent increases to 3% and applies to most rental housing and goes into effect on January 1. may".

This organization points out that price control is especially effective at specific times, especially after a crisis. But that, by itself, is not enough for citizens with lower incomes to access a rent they can afford.

"If those tenants are spending 50%, 60% or 70% of their income on rent, rent-controlled housing is still not affordable," Butler explains. "Furthermore, if higher-income renters stay in rent-controlled housing longer than they normally would, or if landlords convert their rental housing to condominiums or repurpose it, these properties will not be available to renters." low-income".

This association also emphasizes that price control only has an effect if it is accompanied by other measures, such as an increase in the supply of affordable real estate or social rentals.



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