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Liberal Activist Groups Join Forces to Make Housing More Unaffordable

Posted: Jun 11, 2024

Last week, a coalition of advocacy groups, including labor unions, socialists, and other liberal organizations released a report criticizing the real estate industry and affiliated organizations for supporting housing policies opposed by the progressive left. The policies highlighted by the report can be broadly grouped into those that restrict evictions as well as rent control policies. In general, these policy approaches, which have proliferated in progressive jurisdictions, have generally conspired to restrict the supply of housing and, perversely, reduce housing affordability.

The cost of housing is an increasingly salient policy challenge. Indices of affordability for both renters and owners have shown marked declines over time, with recent data approaching historically low affordability. Housing cost inflation has animated monthly inflation data and the Federal Reserve’s restrictive monetary policy. At root, rapid housing inflation is a function of demand in excess of supply.

In a properly functioning market, price increases would be an effective market signal for the need for greater housing supply. This response – the elasticity of housing supply – is observable but varies considerably by location. Critical to the variation in local housing markets to respond to price changes is regulation. As a study published in the American Economic Review found: “housing price appreciation in more regulated cities exceeded the comparable price changes in less regulated cities. Thus, those cities with the greatest increases in housing demand experienced the lowest increases in new housing supply.”

This finding is consistent with the literature examining local restrictions on housing supply through zoning limitations and other similar policies. The policies opposed by the real estate industry – further restrictions on evictions and rent control policies – have similar effects. Despite misleading reports to the contrary, landlords are generally individuals and smaller investors. When regulations increase risks to these investors, housing supply suffers.

With respect to housing policy, liberal advocacy groups have serious credibility challenges. For example, in 2021 the Private Equity Stakeholder Project joined other groups in claiming an “eviction crisis” was underway as part of an advocacy campaign. A plain reading of the data reveals that not only was there no such crisis, but evictions only returned to historical averages a year after the federal eviction moratorium ended – and have since essentially stayed within a narrow range consistent with historical patterns. The eviction crisis that never was examined in a 2022 Atlantic essay, which identified bias as one of the causes for this overblown concern. In particular, the essay noted that, “part of why many forecasts were incorrect is that much of the relevant research was produced by advocacy organizations …”

Sound familiar?

Clearly, policy recommendations from groups that have tried to capitalize on hysteria should be taken a grain of salt. Looking more specifically at the housing policies these groups are defending in their recent report, serious observers should note that both policies – restricting evictions and rent control – would exacerbate the housing affordability challenge, not resolve it.  

Research on the effects of the COVID-era eviction moratorium on landlords found that rent nonpayment increased significantly, which disproportionately affected small landlords. It is important to note that smaller landlords make up the bulk of rental property ownership. According to JP Morgan, landlords coped with missed rent payments by missing mortgage payments or otherwise cutting costs such as deferred maintenance. Ultimately, evictions, while regrettable, are an essential part of a functioning rental market. Further restricting legal eviction processes will ultimately only serve to restrict supply and worsen the housing affordability crisis.

The same is true for rent control. As has been well-documented in a recent book, The War on Prices, rent controls are a demonstrable policy failure that lead to restricted supply and a poorer-functioning housing market. Another recent paper examined 112 empirical reports assessing the effects of rent control. Unsurprisingly, this meta study confirmed that rent controls reduce mobility, reduce housing quality, increase rent in uncontrolled markets, and generally reduce the supply of new rental housing. In short, rent controls singularly fail to mitigate housing affordability challenges.

Policymakers should not be misled by advocates retreading tired policy proposals that will ultimately harm renters and homeowners. These organizations have demonstrated a willingness to distort facts to suit this agenda, and last week’s report is no different.