Rent Control Is Making a Comeback. That’s Not Good.

“Why do bad ideas return — even those that have been roundly rejected?” That’s the question a friend asked me when he heard about an effort to bring rent control back in Massachusetts.

In 1994, Massachusetts overturned a rent control law that had been on the books since 1970. It’s easy to see why. Seventy-five years of economic studies have reached the same conclusions: Rent control reduces rental housing supply, fuels dramatic rent increases in exempt housing, and discourages reinvestment in rental properties.

California voters, hardly known for conservative leanings, lodged one of the latest salvos against rent control last year. Not only did they handily crush a proposal to lift statewide restrictions on local rent control laws — for the third time — but they also shut off a primary funding spigot for similar propositions in the future.    

However, in other states, the pendulum is swinging the other way amid a nationwide shortage of 4.7 million homes and consequent increases in housing prices and rents that have outpaced income growth across most of the country for two decades. In Massachusetts, the average rent of $2,517 per month is 65 percent higher than the national average.

Persistent progressives

In 2023, the Boston City Council advanced Mayor Michelle Wu’s rent control proposal, which would have capped annual rent increases in the city to the lesser of the consumer price index (CPI) plus 6 percent or 10 percent. Boston still needed the Massachusetts state legislature’s blessing, however, and, as of two years ago, that body continued to view rent control as ill-conceived. It rebuffed the legislation.

More recently, the Massachusetts attorney general’s office certified the legality of a rent control ballot initiative, and its progressive organizers are collecting signatures to put the question to voters across the state in November 2026. The proposal is even more draconian than Mayor Wu’s plan: It seeks to cap rent hikes to the lesser of annual inflation or 5 percent with some exemptions, including newer rental housing.

Rent control efforts are taking place across the country, and some have found footing. The State of Washington has passed a law to cap annual rent increases to the lesser of inflation plus 7 percent or 10 percent. Meanwhile, the City of Passaic, N.J., amended an existing rent control law to halve rent increases to 3 percent annually. It also requires landlords to get approval from a city board to exceed 3 percent when a unit turns over.

Promoting scarcity

When governments try to control prices on certain items, especially in times of inflation, the result is shortages, which often exacerbate inflation upon the repeal of the policy. The Nixon administration learned that lesson in the early 1970s when it froze prices and wages. 

When it comes to controlling prices of rental housing, even organizations favoring such policies cut corners to support their argument. In one paper that includes an overview of three decades of rent control in New Jersey, the author cited a study that said the supply of rental housing increased. But it also admitted that most of the growth was “largely attributed to landlords slicing up larger units into smaller ones.”

Another review cited rent control studies that could not discern a clear effect on new supply, noting that the laws often exempt newly built apartments for a number of years. Still, evidence showed that rental housing supply decreased due to the conversion of rentals to condominiums. My suspicion is that those conversions happened shortly before an exemption expired.

Unleash supply

The market reality is that investment returns, driven by rent growth and property appreciation, incentivize multifamily developers to risk their capital. Instead of introducing new regulations that will disincentivize that activity, policies should focus on removing obstacles to new supply, notably zoning barriers and land use policies that result in a shortage of all housing types.

Some cities that are known for a lack of barriers to housing development are taking additional steps to further unleash new supply. Earlier this year, for example, the city council in Austin, Texas, amended building codes to allow single-staircase multifamily buildings of up to five stories. The move provides apartment developers with the flexibility needed to build smaller complexes more affordably and increases housing options for renters.

A perennial member on the fastest-growing cities list in the U.S. over the last couple of decades, Austin already had witnessed a boom in new apartment construction, with more than one-third of the 336,000 total units in the metro added since 2020. Last year, nearly 31,000 units were built and 16,800 additional units are expected to be completed this year. The beneficiaries have been renters, who have seen average monthly rental rates decline 15 percent from a peak of $1,716 in 2022. 

Austin’s economic and housing dynamics can’t be mimicked in every U.S. community, of course. But the city’s policies illustrate that the private market is quite capable of delivering more housing at an affordable cost to renters without the government dictating rents.  

Matt Frazier is the founder and CEO of Jones Street Investment Partners, a multifamily investment firm.