In 2018, California’s Proposition 10 threw landlords across the country into a panic. If passed, the ballot measure would have paved the way for expanded rent control throughout the state. One leading landlord trade group called the ballot measure “nothing short of an existential threat to the multifamily [landlord] industry.”
Worried about Prop 10’s reverberations in their own cities, landlords from Chicago, New York, and elsewhere raised over $70 million to defeat the ballot measure. The landlords ultimately prevailed — after outspending tenant advocates threefold.
Why did the prospect of rent control in California strike such expensive fear into the hearts of landlords across the country? For landlords, buildings are investments. Sometimes those investments are enormous: the investment firm Blackstone has pivoted to real estate in recent years, spending over $11 billion on it in the last three months of 2020 alone.
But even on a smaller scale, purchasing and maintaining residential property is expensive. Landlords have to pay their mortgages, property tax, and maintenance staff. Landlords expect a return on this investment, and they generally get it.
Rents steadily rise over time, and generally outpace wages and inflation, so owning residential property can be lucrative. Creative landlords can find income streams other than rent as well, like selling to speculators when property values rise. Or, usually at the lower end of the market, they can burn their investment properties and collect the insurance money. Whatever strategy they use, landlords turn significant profits on their investments. Since March 2020, sixty-one of America’s richest landlords saw their wealth increase by $24.4 billion.
Landlords hate rent control because it interferes with this investment cycle. It limits the rent they can extract from tenants, and it limits the control they wield over their properties. Not coincidentally, that’s also why rent control is such a good thing for the rest of us.
It’s easy to understand why landlords hate the regulation of rental amounts. In unregulated housing markets, landlords can charge whatever they want for rent. When a tenant’s lease is up, the landlord can increase the rent by as much as they like. They justify their capacious appetite for higher rents with the standard economics jargon: landlords only charge what the market will bear, and housing supply and demand will ultimately balance out.
The problem is, with an essential commodity like housing, the market will bear an awful lot. Rental housing in the United States is untenably expensive, so much so that it is “literally impossible to afford the rent on minimum wage.” In 2014, almost half of all households paid more than 30 percent of their income (a standard measure of affordability) toward rent. After the economic fallout of the pandemic, this figure is likely much higher. Tenants are routinely forced to choose between paying for food, medical care, or rent.
Rent control prevents landlords from squeezing every penny possible from their tenants. It imposes limits on how much a landlord can increase the rent each year. In New York City, for example, the Rent Guidelines Board generally approves increases in the range of 1 to 2 percent for one-year leases. By ensuring small incremental increases, rent control keeps rents lower over time. The median monthly rent in New York’s regulated housing is 31 percent lower than in unregulated housing.
Landlords, unsurprisingly, hate this.
“Rent control laws are complete bullshit in NY,” one landlord at biggerpockets.com, a popular landlord website, recently wrote. “We have a tenant that moved in in the 80s and pays $680 a month because we are only allowed to increase her rent by 2% a year. . . . The rest of the apartments [in her building] get above $2,200 a month.”
Rent control is effective at keeping rents low, and this is half the reason landlords want to do away with it.
But lower rent increases alone don’t explain the depths of landlord hatred. After all, heavily regulated markets like those in New York City, San Francisco, and Santa Monica remain highly profitable places to own rental housing. Equally important is rent control’s second feature: eviction prevention.
In unregulated housing, a landlord can terminate a tenancy as soon as the tenant’s lease expires. Landlords do not need to give any reason for the termination, and they have almost unlimited prerogative when it comes to eviction. They value this prerogative because it allows them to pivot toward more profitable uses of their investment properties.
For instance, the Bay Area has seen a massive infusion of real estate capital over the past two decades. Wall Street investors have purchased and renovated thousands of residential units, developers have constructed new luxury towers, and the city and state have subsidized megaprojects like Oracle Park, the stadium where the San Francisco Giants play. Joining this infusion of capital is a glut of high-income families looking to rent or buy property in the city.
San Francisco’s landlords can make huge profits by renting to high-income tenants or building luxury housing. The problem, from the landlords’ perspective, is that the buildings and land they own are not vacant. They are filled with longer-term, often lower-income, tenants. Without rent control, landlords could simply evict those tenants, making way for whatever higher-profit use they deem appropriate.
Rent control limits this discretion. Tenants in rent-controlled housing are guaranteed renewal leases, meaning that their landlords have to keep renting to them whether they want to or not. This guarantee leads to housing stability for tenants.
San Francisco’s rent-controlled tenants are more likely to live at the same address long-term and more likely to continue living in the city despite the pressures of gentrification. Importantly, this stabilizing effect disproportionately benefits San Francisco’s black, Asian, and Latino populations.
For landlords, tenant stability is a source of apprehension and resentment. Rent control prevents them from changing their business strategy as housing markets become more lucrative. Instead of renting to richer tenants, landlords are compelled to continue providing housing to their current tenants. This is good for tenants, who get to remain in their communities, but bad for opportunistic landlords seeking the highest returns on their investments.
Human Need, Not Landlord Greed
Rent control shifts the balance of power away from landlords and toward tenants. It limits the scope of the housing market and limits landlords’ power within that market. Landlords perceive this as a threat to their ability to exploit the market for maximum profit — and they are right.
Rent control doesn’t just improve tenants’ market position; it also paves the way for greater working-class organization and political power. With lower rents and guaranteed renewal leases, rent-controlled tenants are better positioned to organize and fight their landlords. They cannot be evicted for demanding more repairs, lower rent, and better housing conditions.
And why stop at their own buildings? As tenants get more organized, they form neighborhood tenant coalitions and statewide advocacy groups. They start challenging the power of real estate in local and national politics.
The landlords successfully fought back this threat to their power in California in 2018. But a year later, they didn’t fare so well. In early 2019, tenants in Oregon won statewide rent control. Several months later, New York’s tenants won a dramatic overhaul of the state’s rent-control system. One landlord compared New York’s new rent laws to physical dismemberment, saying, “It’s almost like you’ve sent me out into the world and said, ‘go to the store and buy all these things,’ but you’ve cut off my arms.” This year, Albany, New York, continued the dismemberment, passing a “good cause” eviction law that provides the eviction protections discussed above.
With a post-pandemic eviction crisis looming, the necessity for housing that meets human need instead of landlord greed has never been clearer. Landlords are prepared to throw tenants out of their homes in order to secure a return on their investments. Expanding rent control will be a key piece of any solution to this crisis, and landlords will fight that solution to the bitter end.
If anything, landlords underestimate the threat of rent control. Socialists should not. By keeping rents affordable and protecting tenants from eviction, rent control converts housing from an investment designed to turn a profit into a benefit designed to meet a basic human need. Rent control limits the power landlords and other capitalists have over our lives. Socialists should fight to make those limits as sharp as possible.