Rent Control in Boston is a Horrible Idea

rent control is a horrible ideaBoston Mayor Michelle Wu recently proposed bringing rent control back to Boston, a policy that has not been implemented in the city in almost 30 years. However, many experts argue that rent control has been a failed policy in other parts of the country and would ultimately do more harm than good for Boston residents.  We agree this is not a good idea.  We do agree with Mayor Wu that housing costs have gotten too high but rent control is not how to fix it. 

The Proposal

In an effort to garner support for the proposal, Mayor Wu has proposed limiting annual rent increases to inflation plus 6%, with a cap of 10% on any annual increase. Certain exemptions would be granted, specifically to housing constructed within the past 15 years and owner-occupied buildings with six or fewer units. While this may seem like a reasonable compromise, the vast majority of economists argue that rent control is counterproductive and ultimately harms tenants in the long run and they are right.

Why is it horrible

Rent control policies have been shown to discourage the construction of new housing, as they limit the potential profits that developers can earn. This in turn exacerbates the issue of housing scarcity and drives up rental prices. Additionally, rent control policies often discourage much-needed investment as well as regular maintenance in current housing, as landlords are unable to increase rents to cover the costs of repairs and upgrades.

While it is true that rent in Boston is expensive, the root cause of this is a simple matter of supply and demand. The city and our state need to do more to encourage development and building.  They are instead constantly doing the opposite by adding more and more overly burdensome energy, building, and permitting policies.  This proposal only scares away more developers and stifles progress. More housing units need to be built to lower the cost of rent and home prices. Rent control policies will lead to less housing being built.  Fewer renovations on rental units ultimately worsen the problem of housing scarcity and drive rental prices up even further. This is bad for tenants who are already struggling to afford their rent.

brownstone in boston - photo courtesy of canvaRather than implementing policies that discourage development and hinder the production of new housing, the City of Boston should focus on promoting policies that encourage housing production and lower the overall costs of construction. This could include zoning reforms to allow for more dense development, streamlining permitting processes to expedite the construction of new housing, and incentives for developers to build affordable units.

In conclusion, while the intention behind rent control policies may be good, the reality is that government-imposed price controls do more harm than good in the long run.  Mayor Wu’s idea of rent control is just what we said in the title. It’s horrible!  There is no better way to take away the incentive of being a landlord in the City of Boston than rent control.  If this even comes close to passing it will cause many landlords to sell their properties at discounts and never come back to Boston again.  When we say at a discount it’s because if this was to pass it would lower multi-family values the minute after it became law.  Nothing will better prevent rents from going up than additional supply.  

What you can do to stop it

If you live in the City of Boston, we encourage you to participate in in the Greater Boston Real Estate Board’s Call for Action and tell your Councilor that you oppose rent control. And follow the Board’s public outreach campaign on Facebook and Twitter and share the content.

This article was written by Michael McDonagh General Counsel of the Lamacchia Companies, Michael McGrory Vice President of Lamacchia Property Management, and Anthony Lamacchia Owner of Lamacchia Property Management.

UPDATE AS OF 3/10/23

Mayor Michelle Wu’s rent control plan has been approved by the Boston City Council. The council voted overwhelmingly, 11-2, in favor of the plan, which will limit rent increases for Boston apartments to 10% or less, tied to inflation.

The plan will not affect smaller landlords and units in buildings less than 15 years old, and around 55% of Boston’s 313,000 rental units will fall under the measure, as per city-data. Even those not affected will face issues if the majority of the inventory falls under this plan because it will create pressure on all if the majority of market rates are regulated. 

We agree with Councilor Fred Baker who argued that the rent control plan will unfairly target a sector that has contributed to creating “generational wealth” in Boston.

It will be an uphill battle for approvals needed before the plan can become law. We will keep you posted on the latest developments as we hear of them.