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Rent measure may worsen housing crisis

EVERYONE KNOWS that for years Boston's rents have made it terribly difficult for low- and moderate-income residents to find affordable apartments. It is not surprising, then, that a number of progressive, well-meaning Boston-area organizations have developed a proposal to limit rent increases in the city. The Boston City Council is scheduled to vote on the measure tomorrow.

The proposal would permit elderly, disabled, and low-income residents in apartments with more than six units to contest annual rent increases in excess of 5 percent, and all renters in such larger apartment complexes to contest increases in excess of 10 percent.

On the surface, this form of limited rent control seems logical and equitable. But paradoxically, the measure could lead to unintended consequences, worsening the housing crisis.

One problem is housing supply. Landlords who try to avoid raising rents to prevent costly litigation are less likely to maintain their properties, speeding deterioration of the existing rental stock. The measure could also provide greater encouragement to condominium conversion, further reducing the supply of rental property. Most important, it would almost surely discourage large developers from building new housing in Boston, even if the new housing is initially exempt from the statute. Possible future control of these properties is factored into the expected value of the development.

The second problem is an unintended adverse "distribution" effect. Landlords would be even less willing to lease units to low-income, elderly, and disabled households, which could grieve rent increases in excess of 5 percent when renting to others would protect them against such action until rents rise by 10 percent.

These long-term, unintended consequences might be acceptable if they were offset by huge short-term gains. Yet any short-term gains are likely to be extremely small given the current Boston rental market. Partly as a result of the weak economy, monthly rents in Greater Boston began to decline after 2000. Citywide, advertised rents declined by 11.8 percent between 2001 and 2003. In the South End, they fell by 15 percent; in Charlestown by 14.3 percent; and in Allston-Brighton by 13.3 percent. In only two neighborhoods did rents rise, and in neither case did they rise fast enough to trigger the action under the rent proposal. Hence, only a few apartments would have been covered by the measure if it were in force today.

One might still argue for the measure as a last-ditch effort to help renters in the future, if nothing else were being done to affect housing prices and rents. Yet something quite important is being done through the recent enactment of Chapter 40R, the most radical reform in housing policy in the Commonwealth in decades. Through a powerful set of financial incentives, Chapter 40R encourages communities to pass "Smart Growth Zoning Districts" where housing can be developed more expeditiously by developers. Over the next 10 years, nearly 30,000 additional housing units could be built under this legislation, with a minimum of 20 percent of these mandated as affordable for low- and moderate-income families. Over time, 40R will mean a slowdown in price and rent increases and more affordable housing for families at nearly all income levels.

And here lies the real danger of the rent proposal. The success of Chapter 40R relies on two factors. First, that enough communities take advantage of the incentives offered to rezone sufficient property to reduce land costs significantly. Second, that developers and lenders are encouraged to take advantage of the new zoning districts and produce enough housing to moderate prices and rents.

There is already evidence in the first few months after passage of Chapter 40R that communities are willing to consider implementing the new law. But approval of the rent measure would almost surely have a chilling effect on developers and lending institutions when it comes to further housing production in the city.

So just when we have made the greatest legislative stride in nearly 40 years to confront our housing needs, passage of the proposed Stabilization Act could undermine the promise of the new state law.

If we are going to meet the moral imperative and economic necessity of meeting the housing needs of Boston's renters, we need to give this new law time to work and not take short-term action that will compromise its ability to get the job done.

Barry Bluestone is director of the Center for Urban and Regional Policy and Daryl Hellman is a professor of economics at Northeastern University. 

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