Elected Officials Denying Rent Control – Montgomery Perspective
Elected officials in Montgomery County, including County Executive Marc Elrich and several Council Members, recently signed a letter to the General Assembly asserting that rent stabilization laws do not hinder development. This claim comes amidst a nationwide financial boycott affecting MoCo’s rental housing industry and an escalating housing shortage. The letter was addressed to the Maryland Senate Judicial Proceedings Committee in response to legislation proposed by Delegate Jheanelle Wilkins, allowing counties to implement “good cause eviction” laws.
One of the key points discussed in the letter was the impact of good cause eviction laws on vacancy control provisions in rent stabilization laws. Vacancy control mandates restrict rental rates on vacant units, which can deter landlords from leasing their properties under rent control. Despite the claims made in the letter, there is substantial evidence from academic research and economist surveys demonstrating the adverse effects of rent control on housing supply. Historically, when MoCo implemented rent control in the 1970s, thousands of rental units were converted to condominiums, prompting the county to abandon the policy. Furthermore, Takoma Park, where rent control has been in place for over 40 years, has not seen any new multifamily buildings constructed post-enactment.
More recently, developers have halted projects in MoCo due to the anticipated impacts of rent control, even before the legislation was passed. The decline in property values of covered apartment buildings and the reluctance of national real estate investors to invest in the jurisdiction serve as warning signals for the economic repercussions of rent control. Real estate experts like Jay Parsons have criticized rent control as a disruptive policy that hinders housing development.
The national financial crisis in the rent-controlled housing industry, triggered by a New York law in 2019, has further exacerbated concerns about the viability of such policies. The collapse of Signature Bank, which had significant exposure to multifamily buildings under rent control, caught the attention of the SEC. This event has prompted regulatory scrutiny on financial institutions with ties to rent-controlled properties, potentially deterring them from providing loans for such projects. The implications of these inquiries by the SEC and the risks associated with investing in rent-controlled buildings highlight the challenges faced by banks and investors operating in jurisdictions with stringent rent control laws.
In conclusion, the stance taken by Montgomery County officials in support of rent stabilization laws contradicts mounting evidence of the detrimental impacts of such policies on housing supply and economic development. As the county grapples with a housing shortage and a struggling rental housing industry, it becomes imperative to reconsider the efficacy of rent control measures and explore alternative solutions to address housing affordability without compromising economic stability.
