It’s one of those sound bites you hear on TV that is catchy, and, seemingly, who would think this is a bad idea other than greedy slumlords?
Not so fast. Let’s dig a little deeper.
There have been multiple bills filed this year in the General Assembly that seek to remove the Rent Control Preemption Act in the state of Illinois. Although there are many reasons to argue why rent control is poor public policy, we’ll examine only a couple of them here.
The main problem isn’t increasing rents. Rising rents are a symptom of the lack of housing development. Proponents of these bills believe that enacting rent control, at least in the city of Chicago, will create more affordable housing in desired locations for low-income individuals and families. This sounds logical, but the unintended negative consequences will result in a reduction of affordable rental properties, more government bureaucracy, increased property taxes and decreased property values.
Tenants who secure rent-controlled units do not leave, and there is no incentive to pursue other housing options. Also, many rental property holders will convert properties into condominiums, further reducing the rental housing supply and adversely affecting the condominium market.
House Bill 2192 would establish six regional rent control boards to oversee all rental units across the state. House Bill 3207 would enact rent control boards across all 102 counties in Illinois. Those proposals allow for the creation of a registration fee. More than likely, the fee is to cover the operational expenses of the rent control boards; however, whether that full cost is the permanent responsibility of the registrant is uncertain.
For example, according to the Santa Monica Rent Control Board in California, it had a budget of more than $4 million in 1996 to oversee rents of 28,000 apartments. If the Illinois regional rent control boards were unable to operate effectively and efficiently on the resources obtained from rental property holders, taxpayers might become partially responsible for supporting operational expenses.
Rent is very multifaceted, and if you regulate the inflation of rent solely and not the nuances that influence rent (property maintenance, taxes and local government fees), rental property holders struggle to sustain housing quality and supply.
As rental property value declines, local governments will need to increase taxes on other property types, fees and services to capture declining property tax revenues on those investment properties.
For the most part, property investors keep their properties in decent condition and work with quality tenants to ensure the property is well-maintained. If increased costs, as mentioned above, and decreased rents are incurred, investment property owners will not be able to preserve the property, or might even be forced to sell the property. Rent control is a poor public policy because it decreases the number of rental properties. Rent control doesn’t solve the affordable housing issue; it aggravates the problem.
Proponents of the current proposals point to places such as New York City and San Francisco as their role models, while those same areas are looking to change their policies because affordability and housing quantity still are an issue.
Elected officials must turn the discussion away from rent control to how we can work with developers and investors to adopt proactive business and housing-growth approaches in areas with housing needs. As a community, we must stand ready to offer innovative solutions and constructive input to address housing-related needs.
• Jim Haisler, who is a REALTOR Association certified executive, is CEO for the Heartland REALTOR Organization, headquartered in Crystal Lake. Licensed since 1996, he has a master’s degree in real estate, holds an Illinois managing broker real estate license, an Illinois continuing education instructor license and an Illinois prelicense instructor license. Haisler is not an attorney and does not provide legal advice.