The Negative Environmental Impact of Rent Control
This March, with Boston facing some of the highest rental prices in the country, the City Council adopted Mayor Wu’s rent control proposal, which is currently stalled on Beacon Hill. The recent debates over rent control (banned in Massachusetts since 1994) have not adequately addressed one important issue – rent control’s environmental impact.
As Wu knows, according to basic economic theory (and numerous studies), rent control limits housing supply in the long run. There are two primary reasons for this. First, it has upstream effects – lower rents make owning rental property less appealing, which reduces demand for new housing development. The other factor is uncertainty. Economists and opponents of Wu’s bill cite this as a major deterrent to further development. Although this particular bill sets a relatively high rent cap (6% plus inflation with a maximum increase of 10%) when compared with past policies in the Boston area, it only exempts new units from rent control for 15 years and would open a path for stricter policies in the future. Indeed, certain city councilors have already criticized it for not going far enough. By reducing developers’ incentive to build more housing in Boston, thereby also raising prices in the uncontrolled sector, this plan would drive people to look outside of Boston for housing – a process that could be reinforced by landlords converting controlled units into condos.
Over time, then, rent control would force people away from Boston’s dense, walkable neighborhoods, which are generally more bikeable and well-connected by public transit, into areas of lower density with reduced access to everyday amenities. This increases car travel, leading to more congestion and, ultimately, more carbon emissions. According to a 2017 study, over 60% of commutes into Boston from surrounding communities are done by car. On the other hand, less than 37% of commutes that start and end in the city use a car.
Additionally, as seen in this map, much of Boston’s suburbs ban, or at least require permitting for, multi-family units. As a result, those living outside the city are more likely to live in single-family homes. From an environmental perspective, this is problematic, as single-family homes typically use more than double the electricity of multi-family units. This is especially significant when we consider that the residential sector accounts for 20% of all U.S. CO2 emissions.
All of these problems are exacerbated by the “lock-in effect” of rent control. The lock-in effect refers to tenants accepting certain inconveniences, notably longer commute times, to stay in their rent-controlled units. Unsurprisingly, research from New Jersey indicates that there is a significant positive relationship between rent control and the percentage of the working population with long commute times.
Lastly, we cannot separate rent control from Boston’s “Green New Deal” – Wu’s ambitious project (which now includes a $2 billion investment in Boston public schools) for tackling racial inequality and achieving climate justice in the city. This plan depends on public investment, largely at the city and state levels. Unfortunately, cities and states lack the capacity to run up debt like the federal government, meaning that they need a stable tax base to make public spending projects economically viable. 73.7% of Boston’s tax revenue comes from property taxes, which are also the second largest source of income (outside federal transfers) for Massachusetts. Because the value of rental properties is based primarily on rent charged, rent control reduces property values and, consequently, property tax revenue. For example, a 1992 study estimates that New York City would have increased property tax revenues by $119-$149 million ($263-$329 million today) annually through the partial reduction in rent-controlled units. Given Wu’s climate objectives, cutting into property tax revenue would be a major concern.
If Wu and state politicians are serious about realizing their climate goals, they must factor in the hindrances that rent control will present. Considering the negative environmental effects, longer commute times, and price increases in market-rate units, it seems unlikely that rent control will, as hoped, make the Boston area more livable.
by Nathaniel Gehrke
