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VIEWPOINT: Wilmington City Council Should Reject Rent Control

What do 90% of economists, the Brookings Institution, renowned left-leaning economist Paul Krugman, and this Wilmington Councilmember have in common? We all think rent control is a bad idea.

In a 2018 report by the Brookings Institution, “What Does Economic Evidence Tell Us about the Effects of Rent Control?” author Rebecca Diamond wrote: “Rent control appears to help affordability in the short run for current tenants, but in the long run decreases affordability, fuels gentrification, and creates negative externalities on the surrounding neighborhood.”

In a 2000 New York Times article, Paul Krugman wrote, “The analysis of rent control is among the best-understood issues in all of economics, and — among economists, anyway — one of the least controversial. In 1992, a poll of the American Economic Association found 93 percent of its members agreeing that ”a ceiling on rents reduces the quality and quantity of housing.”

I am not on the Community Development & Urban Planning Committee, but I listened to last Thursday’s meeting where the rent control legislation was voted out. Many supporters shared powerful stories: slumlords ignoring unsafe conditions, rent prices rising faster than incomes, and the fear of displacement. The pain was palpable, and it was hard not to be moved by some of the testimony. But just because the local pain and problem of our nationwide housing crisis are real, it does not mean that the proposed solution (rent control) will work, or move our City forward. Some may argue the legislation is not “rent control” but “stabilization,” yet the same economic distortions from price caps apply.

Rent control may cap rent hikes, but it also caps the incentive landlords have to keep up their buildings or improve neighborhoods. Councilmembers already get many calls about neglected properties that negatively affect both tenants and neighbors. I fear those complaints would only increase should this pass.

Arguably worse, landlords could take their rentals underground where tenants have no protection whatsoever. And as happened in San Francisco, some may evict tenants to convert their rentals into more profitable AirBNBs. That’s a double whammy: not only could rent control further proliferate AirBNBs in Wilmington, it could also reduce the rental supply as landlords convert their properties into more profitable uses.

Ironically, this ordinance would punish the exact landlords we should be supporting: those who keep rents flat to retain a great tenant and avoid the cost of tenant turnover. If rent control passes, landlords would feel forced to raise rents annually to avoid being boxed in later.

Rent control could chip away at the very thing housing is supposed to offer: a chance to build wealth. Many rentals are in Wilmington’s lower-income neighborhoods. If rent control pushes down property values, it won’t just hurt landlords, it will hurt the neighboring homeowners as well. Families trying to build equity could see their biggest investment lose value, through no fault of their own.

If we want long-term solutions that improve housing access, we owe it to residents to pursue strategies that expand opportunity and supply, not restrict it under the guise of protection. That means supporting public-private partnership efforts similar to REACH Riverside, who are building high-quality mixed-income housing while revitalizing the surrounding community. As the former board chair of the Wilmington Housing Authority and former board member of REACH Riverside, I’ve seen firsthand that progress comes from adding housing, not freezing it.

In closing, rent control may sound and feel like a tempting policy to implement, but its long-term consequences would outweigh any short-term benefits. It discourages maintenance, reduces the supply of rental housing, and hurts the very renters it claims to protect. Wilmington City Council should reject this policy.

James Spadola is an at-large Wilmington City Councilmember on the finance committee and the vice-chair of the public safety committee. He is the former board chair of the Wilmington Housing Authority and former executive committee board member of REACH Riverside

Source: https://delawarebusinesstimes.com/news/vwpt-wilmington-reject-rent-control/