Rent Control is OxyContin & 'Big Socialism' Wants Seattle Addicted

Stockholm … not exactly ‘destroyed,’ just light on affordable units

Stockholm … not exactly ‘destroyed,’ just light on affordable units

“In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing.” - Assar Lindbeck, an economist who at one time supported Sweden’s Labour Party—Socialdemokraterna—and former chair of the economics Nobel Prize committee. Incidentally, Stockholm suffers such a severe housing shortage that people wait up to 20 years for rent-controlled apartments. “Destroy,” seems excessive. Stockholm is unrelentingly pleasant, IF you can find a place to live.

That sounds crippling, like opioids no? Okay, okay, clickbait - guilty as charged. However if you give this argument a chance, you might just see how rent control is the OxyContin of housing policy, and 'Big Socialism' wants Seattle addicted.

First, opioids are essential healthcare. Acute pain is no joke and opioids can and must be used responsibly. A key issue with opioids is their over-prescription, sometimes based on false data. Purdue Pharma downplayed the addictive nature of its drug OxyContin to increase sales with disastrous results. But, we still need opioids.

In an eerily similar way, District 3 Seattle City Councilmember Kshama Sawant pushes for rent control without the evidence to back it up. “We Need Rent Control!” is the first line of the first issue on her re-election campaign website. Yes, District 3 could vote her out this year. But, It will be a tough to overcome her generous funding and support from ‘Big Socialism.’ Councilmember Sawant not only raised about half her campaign contributions by value outside of Seattle, but she also allows The Socialist Alternative party to exert substantial control over her council office.

Like Purdue Pharma, Councilmember Sawant has a non data-based incentive to tout something. Instead of shareholders and Oxy, it’s non-Seattle patrons and rent control. She is beholden to an uncomfortably large amount of people and cash who don’t even live in or come from District 3, let alone Seattle. Hence: ‘Big Socialism.’

But what evidence is there on rent control? Well, there is this recent paper by Stanford economists: The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality: Evidence from San Francisco, by Rebecca Diamond, Tim McQuade, and Franklin Qian. It concluded that rent control has positive short term effects, but ultimately makes housing more expensive and scarce in the long run. That’s not ideal.

Councilmember Sawant refers to this rent control critique as “corporate landlord lies.” But it’s supported by an economics study written in an academic setting, not a PR firm retained by a private equity corporate landlord. Since almost none of you will read the paper, you can also listen to a fabulous episode of the podcast Freakonomics where Steven Dubner interviews Rebecca Diamond, one of the authors. It’s a must-listen on the topic.

If we take the Freakonomics discussion and that paper in good faith*, we see two main conclusions about rent control, at least in San Francisco:

  1. In the short term, rent control reduces renter mobility - people moving - by 20% and significantly reduces displacement of minority communities. (fewer people moving—> less displacement)

  2. In the long run, rent control reduces housing supply, thereby increasing rent and the cost of living for everyone. (Sounds like SF right?)

So effect 1 is great and effect 2 isn’t so great. Like those first few opioid highs, effect 1 is the holy grail. But if you keep using, effect 2 creeps in and makes your city far worse off. Prof. Diamond is also very specific here: Rent control is good for people struggling to make rent today and its bad for everyone going forward, including those less well off.

What if we could have effect 1 without effect 2? It might be possible.

Seattle’s affordability problems are similar to San Francisco’s — Geographical constrains, inadequate transit, tech-driven population growth, and restrictive zoning. It’s fair to assume rent control would impose similar desirable and undesirable effects here as it did in San Francisco.

But how do we mitigate the long term pains of rent controls? By making it a short course treatment.

Zoning is Seattle’s biggest housing policy failure. 69% of residential land is zoned single-family, which severely limits housing supply. That must change. But, even if Seattle were to implement a plan as bold as Minneapolis’s blanket upzoning, it would take years and years for the market to supply enough housing to meet today’s need. After-all, bad social policy caged the market, blocking new home construction for decades— A policy implemented in the 1950’s long before Amazon existed for that matter.

Two homes, one plot…

Two homes, one plot…

So even with upzoning, we also need to implement socially a solution for the people struggling to live in Seattle today. Based on Diamond, McQuaid, & Quin’s paper there is a data driven basis to advocate for temporary rent control inextricably liked to city-wide upzoning—the hypothesis being: let’s protect people today without selling out Seattleites in the future. Broadly speaking, imagine if rent control applied to existing rental units for a fixed and relatively short amount of time. And every housing lot capable would be zoned multifamily where new units would rent at market rate.

The goal of this policy concept is to protect against eviction and displacement fueled by today’s socially imposed excessive rents, while still encouraging developers to add market rate stock in newly opened multifamily housing plots. But, rent control is illegal in Washington State. In a world with good zoning laws, it should remain so.

That illegality might change thanks to the efforts of people like Councilmember Sawant. If it does, we need to be quite worried about the political pressure from ‘Big Socialism’ to overprescribe rent control here in Seattle. Remember, 50% of her campaign cash doesn’t come from Seattle. Those contributors wouldn’t be exposed to the mess of Seattle overdosing on rent control.

But as you can see from actual research, we might just be able to have it all. Remember, there is a legitimate medical use for OxyContin. It’s possible that with a narrow and limited scope - like a responsible course of opioids - A sunsetting rent control policy could be the temporary relief our city needs, so long as it’s absolutely tied to upzoning.

We can’t just mask today’s pain with rent control and get hooked. We must cure the underlying cause of unaffordability first and foremost.

My dream would be for Prof. Diamond to weigh in on such an idea. Actual economists and urban planners would need to draft the details of such a policy after all. In fact, such scholars could hopefully propose even less invasive ways than temporary rent control to protect against displacement. That would allow Seattle to act without a major state law change; one that could expose Washington Sate to the destruction of mainlining rent control. We’ll see!

*Don’t agree? Send me your research on why.

Nathan ChaffetzComment