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Can The End of Rent Control Tell Us Anything About The Beginning Of Rent Control?

Cambridge, Massachusetts, ended rent control in 1995.

Cambridge, Massachusetts, ended rent control in 1995.

Although three rent control-related ballot petitions have been circulating in Alameda in recent weeks, only one, the Alameda Renters Coalition’s stringent rent control measure, seems likely to make it to the ballot. Can rent decontrol offer any insights into what Alameda might face if the measure passes?

Late yesterday, city clerk Lara Weisiger said that neither proponents of an anti-rent control measure nor of a measure intended to moderate an earlier city council ordinance have submitted signatures yet.

The renters coalition petition is likely to make it to the ballot this November, unless county election officials find a deficiency in the signatures based on a random sampling, which would then require a more time-consuming in-depth examination of signatures. Alameda city council then needs to vote to put it on the ballot.

Tenant organizers have said they are already changing gears to support a get-out-the-vote effort for November.

With the possibility of a strict rent control measure on the horizon, can a study of rent decontrol give any hints of of what Alameda might expect?

A 2012 research paper jointly published by the Massachusetts Institute of Technology (MIT) economics department and the National Bureau of Economic Research studied the effects of the end of rent control in Cambridge, Massachusetts, in 1995. Rent control had been in force in Cambridge from 1970 to 1994, for rental units built before 1969, and was eliminated in a statewide vote.

The authors of “Housing Market Spillovers: Evidence from the End of Rent Control in Cambridge, Massachusetts,” pooled “data on the universe of assessed values and transacted prices of Cam-
bridge residential properties between 1988 and 2005.”

Action Alameda News connected with Christopher Palmer, a co-author of the study who was then affiliated with MIT and is now assistant professor of real estate and Bakar faculty fellow, Haas School of Business, University of California at Berkeley, to ask if the study could foretell anything for Alameda.

Palmer responded:

“1. First, it’s not completely straightforward to use the results of our paper about immediately after the *end* of rent control to learn about what would happen immediately after the *start* of rent control. What we can say is that over the 25 years of rent control in Cambridge, owner-occupied property values that were in neighborhoods with lots of rent control lagged behind appreciation in other parts of the city. These changes probably take time to set in since they unwound only gradually over the ten years following the end of rent control.

“2. So yes, over time, having a strict rent-control law in place would lead to less property value growth in nearby properties than similar properties not surrounded by as many rent-controlled apartments.

“3. Note that this effect on prices, in and of itself, is a two-edged sword. For current homeowners, it’s an extra burden. Landlords clearly pay the brunt of the costs of rent control, but local homeowners are clearly affected as well.

“4. Future homebuyers might appreciate the slower growth in property values, although those values in those neighborhoods aren’t growing as quickly for a reason so it’s not clear that they’re better off.

“5. Upshot: rent control not in the best interests of current homeowners.

“6. Current renters: if they’re lucky enough to be in a rent-control-eligible apartment, then they benefit. If they’re in market rate apartments, they may face higher rents than they would have as rent-controlled apartments become increasingly hard to score.”

David Autor, another co-author of the study, declined to provide comment through the MIT press office, citing a busy schedule.

Through the MIT press office, Parag Pathak, the third co-author, agreed to respond to questions, while traveling, but had not done so by press time.

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