Peter Lewis

In communities across Massachusetts, the problem of housing affordability is reaching a crisis point. Indeed, millions of Americans throughout the country are struggling to find homes they can afford, requiring policymakers at every level of government to look for ways to reduce the cost of housing.

At the state and local level – and even through ballot measures – rent control is regularly tossed around as a possible solution in Massachusetts despite clear evidence showing that the policy tends to backfire wherever its been imposed. Now, though, some members of our congressional delegation – including Sens. Ed Markey and Elizabeth Warren – are advocating for a form of federal rent control.

Unfortunately, in its attempt to address the housing crisis, the Federal Housing Finance Agency (FHFA) is considering a policy that would surely make it worse.

Proposal Sends Chilling Signal

The FHFA oversees Fannie Mae and Freddie Mac, also known as the GSEs, short for “government-sponsored enterprises.” Together, the GSEs backstop the loans behind more than four million apartment units nationwide.

Now, the FHFA wants to use – or rather, misuse – its oversight authority to impose government price controls on all apartments financed with GSE-backed loans. The fact that the agency is even considering such a plan is sending a chilling signal to housing providers across the country. But if the agency’s leaders were really to move ahead with nationwide rent control, it could destabilize America’s housing market and capital markets more broadly.

On the surface, rent control seems like a straightforward, low-cost way to keep housing costs in check. FHFA’s leaders hope that by simply capping rent increases, they can keep housing costs manageable for America’s working-class families. The reality, however, is much more complicated and, indeed, much more grim for rent control’s supporters. That’s because most studies show that rent control discourages new housing construction. In addition to that, research also shows that rent control discourages housing providers from investing in their existing housing stock. Over time, this causes the quantity and the quality of available rental housing to decline, hurting the very people that rent control is meant to help.

Furthermore, the biggest beneficiaries of rent control are not the low- to middle-income renters who struggle with high housing costs. In the few states where rent control exists, it is available to well-off renters who need no assistance from the government. Studies show that when rent control is in place, these renters stay in their apartments longer than otherwise would. Even though they can afford market-rate rents, they prefer their discounted, rent-controlled housing, keeping these apartments off the market, robbing less well-advantaged renters of an opportunity to find housing that suits their needs.

Finally, rent control does not address the root of the housing affordability problem – the lack of supply. Demand for rental housing has far outpaced supply in recent years. Today, Boston needs to build 3,000 apartments each year just to meet current demand. It is this supply shortfall that has led to the housing crisis.

Discourages Use of Federal Dollars

The solution is not to artificially put broad, government-mandated price controls on homes. The solution lies in policies that will foster the construction of more homes.

With zoning reform and with bigger national investments in affordable housing for those who need it, for example, we can close the supply gap and end this housing crisis. This is not something that rent control can do. Indeed, the FHFA’s national rent-control plan would discourage the use of federal housing resources, undermining the agency’s own mission. More than that, it would make it harder for builders to finance the construction of new homes and apartments. That would result in few homes getting built, which would make the housing shortage worse.

From an industry perspective, members of the Institute of Real Estate Management (IREM), which represents nearly 20,000 property and asset managers, agree that the solution must address the supply of affordable housing. Like other industry experts, property managers and owners understand that rent control will bring about unintended negative consequences. IREM members joined thousands of individuals who responded to FHFA’s formal request for input to convey these views.

To be clear, the FHFA’s goal is a genuinely noble one. No one can argue that keeping housing costs low for working-class families is a bad thing. Yet we cannot judge this policy proposal – or any public policy, for that matter – by its intentions alone. In fact, history teaches us that often bad policies are enacted with the very best of intentions. So it is with rent control, and so it will be if the FHFA moves forward with its plan.

Peter Lewis is executive vice president of property management at The Schochet Cos. in Braintree, which manages over 5,000 apartments across New England.