Is Expanding Rent Control in DC’s Future?
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Skyrocketing rents in the District have led residents to push for more expansive rent control policies. As it stands, the only properties subject to rent control are those that were built before 1976. Multifamily buildings that were opened prior to then are limited to inflation plus 2% year-over-year rent increases. Meaning that if rents at a controlled property are $1,200 a month this year, and the yearly inflation rate is 1.7%, the maximum year-over-year rent growth permitted is 3.7%–or the property charging no more than $1,244 a month the following year. Like most laws enacted to influence free market economics, this policy brings a delicate balance of pros and cons to the DC multifamily market.
As mentioned above, newer Class A apartments are not subject to DC rent control policies; a clause that helps provide economic incentive for continued multifamily development within the District. For older buildings, owners have found loopholes to ensure rent gains beyond legislative guidelines. One common strategy is applying for a “substantial rehabilitation” petition, which permits owners to raise rents by 125% to cover renovation costs. Owners then have incentive to neglect buildings to win rent increases, creating a double edge sword of negative living conditions—high rents and poorly maintained apartments—that are unfair to tenants occupying these properties. Such provisions have led many to push for stricter rent control policy, or even question legislation’s place in regulating the District’s multifamily market.
A big critique of the current legislation is that there are no income caps for renters occupying rent-controlled units. Higher-income individuals are free to live in them, despite being able to afford more expensive dwellings. Lower-income individuals, who are meant to benefit from rent control laws, are then tasked with competing for apartments against more qualified candidates. Rent control is most beneficial to renters who would be unable to afford their current residences if subject to market-rate rent increases going forward. With all that said, rent control in the District is here to stay. The question is: what will it look like in the future?
The DC Tenants’ Union is calling for multiple revisions to the District’s rent control laws. Some of their current expansions include:
- Limiting year-over-year rent increases to inflation.
- Making all multifamily properties built before 2005 subject to rent control.
- Limiting the time new projects are exempt from rent control to 15 years.
Economists looking on would argue that these recommendations could prove catastrophic to the DC housing market. Despite the short-term affordability benefits given to current tenants, long-term ramifications likely include decreased affordability, increased gentrification, and negative externalities to surrounding neighborhoods. We are already seeing some of these consequences with current legislation. Rent control may be a temporary solution to an even deeper economic problem emerging in DC real estate: an unaffordable, rapidly increasing housing supply unsupported by average District incomes.