City Council debates rent control, angering business groups

When Councilmember Kendra Brooks joined City Council over three years ago, she introduced a resolution calling for hearings on rent control.

During the pandemic, Brooks and her colleagues shifted to focus on eviction prevention and it is only now, as the mayoral and Council races heat up, that she is coming back to rent regulation.

“We see rent prices continue to skyrocket,” Brooks told a scrum of tenants and activists outside City Hall before the long-awaited rent control hearing Wednesday. “We also see the prices of goods and services going up, but we don’t see it going up in our pockets. It’s time to return to this conversation about rent control.”

Philadelphia’s median gross rent is $1,149, according to the latest Census figures.

When Brooks was elected in 2019, she and district representative Jamie Gauthier were the only two renters on City Council. In a city that many experts believe could become majority renter by the end of this decade — the percentage of homeowners fell to 52% from over 58% in 2006 — their focus on tenant issues is symbolic of Philadelphia’s shifting housing politics.

But absent a progressive sweep of the mayoral and City Council elections, rent regulation faces a difficult path in Philadelphia. At a recent mayoral candidate forum on development, every candidate except Helen Gym unequivocally rejected the idea.

When most people think of rent control, they imagine rigid forms of regulation from the early 20th century that froze rents during times of particular stress, such as the housing shortage after World War II. It’s that kind of rent control — with strict monetary caps — that most economists argue against and that most opponents form their arguments around.

That’s not what most rent regulation looks like in the United States today. In New York City, about 20,000 units are still under strict rent control, while half the city’s rental units are protected by rent stabilization policies where a municipal board sets the percent that rents can be increased by annually.

Most forms of rent regulations exempt small landlords. New construction is usually exempted, too, partly because newly built apartments tend to be marketed to higher-income people and partly because most policymakers don’t want disincentives for new construction. In New York, rent stabilization applies only to buildings from before 1974; in San Francisco the date is 1979. A new law in St. Paul, Minn., was quickly amended to adopt a rolling window that exempts new construction for 20 years.

Rent regulations also usually feature “vacancy decontrol,” which is meant to allow landlords to raise rents more dramatically between tenants. Tenants groups have long argued this is abused, effectively removing units from regulation by sending rents soaring between occupants. New York recently ensured increases cannot spike wildly, while still giving landlords a cushion to make repairs.

During Wednesday’s three-hour hearing in Philadelphia, Brooks and her colleagues heard testimony from tenants, local advocates, and experts from New York City.

Industry voices were relegated to the public comment section. Arguments against rent control included critiques that it would limit new construction, deter reinvestment in properties, and drive units out of the rental market as owners sell their properties.

Smaller landlords spoke against the idea in especially vituperative terms, sometimes denouncing other tenant-friendly bills that City Council passed in recent years such as lead paint and bedbug regulations.

“The city [has been] sticking their hands in my pocket, and in the pocket of other landlords,” said Stanley Daniel, who estimated that he had rented to 600 Philadelphia tenants over the last 15 years. “Instead of passing all kinds of silly legislation that affects the rents, you guys should look at our side of the story before you make decisions.”

Landlords with only a few units testified that they would not have been able to rehab their buildings or save for their retirements if they had been rent-regulated.

That echoed mayoral candidate Allan Domb’s argument against rent control at the mayoral forum on development, in which he stated that 90% of Philadelphia landlords were “individual mom and pops” as opposed to jurisdictions like California where 70% of rentals were owned by corporate operations. (Domb, a former Council member who resigned to run for mayor, himself falls in the latter category.)

At Brooks’ hearing, a variety of other interest groups testified against the idea of rent control as well, including the Building Owners and Managers Association, the General Building Contractors Association and the Building Industry Association, which represents residential developers.

“Economists ranging from Milton Friedman to Paul Krugman are opposed to the regulation of rents,” said Andre Del Valle, of the Pennsylvania Apartment Association. “Rent control will lead to a misallocation of limited resources as many housing suppliers will not invest in the routine maintenance of their property as they cannot charge market rents to offset those costs.”

Rent control has been gaining traction around the country in recent years. In 2019 Oregon and California passed laws that limited rent gouging, while New York state tightened its rent regulations to preserve affordability in New York City and allow smaller municipalities to adopt their own regulations. A member of Philadelphia’s Harrisburg delegation, state Sen. Jimmy Dillon, plans to introduce a rent regulation bill soon, too.

At the municipal level, the policy is under active consideration in Minneapolis and Boston where Mayor Michelle Wu ran on a platform that include regulating rent gouging. In 2021, St. Paul, Minn., adopted an aggressive policy that set a hard ceiling on yearly rental increases and included new construction. (It has since been moderated.)

“We need to lift wages and bring costs down,” said Dillon, a Democrat from Northeast Philadelphia, at Brooks’ hearing.

Dillon said the bill would apply to landlords who own more than 15 units. It would not apply to new construction for 10 years and would only limit dramatic rent spikes, patterned after the California and Oregon legislation.

“As landlords have scrambled to recoup their losses during the pandemic, rent prices have skyrocketed,” Dillon said. “I’ve heard stories from constituents about their monthly rates being increased 50% over what they were just paying one year ago. This isn’t right; this isn’t fair.”

The scholarship around rent regulations is complicated. A San Francisco study found that rent control limited displacement in the short run but prompted a substantial minority of landlords to sell their units, thus removing stock from the rental market. Studies of Massachusetts found that rent control similarly encouraged some landlords to sell their properties, while ensuring that existing renters had longer tenures in their units and preventing huge price spikes unrelated to property reinvestment.

The evidence of such laws hampering new construction is lacking, because rent regulations usually only affect older buildings. But the evidence is strong for it protecting existing tenants and stabilizing neighborhoods that might otherwise see massive demographic shifts due to reinvestment.

That’s what the rhetoric used by both Brooks and her allies highlights. They argue for rent control’s potential as a means of ensuring income diversity and stable tenancy in neighborhoods that are seeing real estate investment and demographic change. (Its efficacy in low-income neighborhoods that are not seeing reinvestment is a different question.)

“Do you know what rent control is about to us? Neighborhood stabilization,” said Brooks. “It’s past time we approach rent control as a strategy to violence prevention, to homeless prevention, and to community empowerment, because affordable communities are strong communities.”