A young couple recently contacted me for advice about moving to Denver from Des Moines, Iowa. Both had strong marketable skills and good experience, so job offers came readily. They love Colorado and were eager to embrace the active lifestyle and the local culture.
The problem was the cost of living.
Rents were through the roof, they said. Salaries … not so much.
They didn’t relish making a long commute to work to live in an apartment they could better afford. The whole apartment-hunting experience was giving them second thoughts about the wisdom of coming to Colorado.
It’s hardly news that housing costs have soared across the Front Range and in Colorado’s resort towns. Recent studies found apartment rents in the Denver area increased 14% to 25% from 2021 to 2022. And they weren’t cheap before that.
Average rent in Denver is estimated at around $2,000 a month for 841 square feet, about twice what they would pay for the same space in Des Moines.
For a young couple, making car payments and paying off student loans, it’s a heavy lift. For a single parent with a couple of kids, it can be soul-crushing.
So, I admire the advocates and state legislators working to try to address the situation. Rep. Javier Mabrey, in particular, has stepped up and said that something must be done.
Building more housing is a long-term approach, he has said, but in the meantime, communities should have the ability to institute rent controls to stabilize prices and protect renters from being victimized by greedy landlords.
It sounds good. And as much as I’d like to believe rent controls would be the magic bullet, I’m afraid the research overwhelmingly suggests otherwise.
My friend, Rebecca Diamond, professor of economics at Stanford and director of the Cities, Housing and Society Lab, has crunched the numbers from cities that have employed rent controls and found disturbing, unintended consequences.
Sure, the immediate effect for renters is helpful. Rent increases are limited. Tenants are not constantly at risk of being priced out of their homes and displaced from neighborhoods where they have developed friendships and support systems.
What’s wrong with that?
Well, nothing, except Diamond and her colleagues have found that over time rent control actually “decreases affordability, fuels gentrification and creates negative spillovers on the surrounding neighborhood.”
The evidence in Cambridge, Mass., and San Francisco offers a cautionary tale.
After 24 years of controls, rents at the units in Cambridge were 40% below those of unregulated units. Tenants in rent-controlled buildings in San Francisco had similar savings.
Seriously, if you scored one of those units, you figured you were golden.
But face it, our sacred market economy is stubbornly resistant to control.
Over time, the rent controls incentivized landlords, whose incomes obviously had stalled, to convert the units to condos, to move into the units themselves so they could legally evict the tenants, or simply to pay renters to move out so they could build new apartment complexes that would be exempt from control.
Other landlords continued to operate their buildings under the controls, but reduced building maintenance and services, allowing them to fall into increasing disrepair as income from the properties declined. Then, when the controls inevitably were lifted, the landlords often would tear down the units and replace them with — you guessed it — high-end housing.
Ultimately, the measures reduced the number of renters living in modestly priced apartments, and increased housing stock for higher-income residents who bought the condos or moved into the fancy new apartments built by landlords determined to escape the rent controls.
“It appears rent control has actually contributed to the gentrification of San Francisco, the exact opposite of the policy’s intended goal,” Diamond concluded in a 2018 piece for the Brookings Institution. “Indeed, by simultaneously bringing in higher income residents and preventing displacement of minorities, rent control has contributed to widening income inequality of the city.”
While rent control appears to be a well-intentioned idea whose time has passed, Diamond suggests old-fashioned subsidies or tax credits might be a more effective strategy for maintaining the supply of modest housing and keeping renters from losing their homes.
Subsidizing housing is hardly a new idea. Housing vouchers for low-income families were accepted policy for decades until the budgets for them were slashed by the Reagan administration in the 1980s. Consequently, one of the enduring legacies of the Reagan years is the chronic homelessness plaguing American cities.
While Rep. Mabrey and his colleagues may have to go back to the drawing board to find real relief for beleaguered renters in a town without pity, it’s good to know that somebody is paying attention to the problem that threatens to sabotage our economy and our quality of life.
Oh, and as for the young couple from Des Moines, they decided to throw caution to the wind and follow their hearts. They found an apartment on the east side of Denver and moved in just in time for a decidedly Iowa style snowstorm to turn the neighborhood streets into skating rinks.
With two jobs, a little luck and some penny-pinching, they just might be able to pay the rent and still have money left for a day of snowshoeing in the mountains.
Talk about a warm Colorado welcome ….
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