In communities across the country, including here in Cincinnati, the issue of housing affordability is reaching a crisis point. Millions of Americans are struggling to find homes they can afford, prompting policymakers at every level of government to look for ways to reduce the cost of housing.
Families across Ohio are also grappling with stagnant wages, making the dream of homeownership increasingly out of reach as wages have not kept pace with housing costs.
Unfortunately, in its attempt to address housing affordability, the Federal Housing Finance Agency is considering a policy that may appear as a depressant to rising rents, but in reality, would exacerbate the state’s affordability problem.
The FHFA oversees Fannie Mae and Freddie Mac, which backstop the loans behind more than four million apartments nationwide. Now, the FHFA is considering a proposal to impose government price controls on apartments financed with Freddie- or Fannie-backed loans. With numerous studies citing the detrimental impact of rent stabilization, the FHFA could destabilize America’s housing market.
In a request for public input, 17 U.S. senators sent a letter to the FHFA supporting federal rent control on housing backed by such loans. Our own Senator Sherrod Brown, who serves as chairman of the Senate Committee on Banking, Housing and Urban Affairs, is one of the lead signatories. But this dangerous proposal would come at a time when Ohio is starving for new housing development, particularly in the face on construction delays resulting from zoning restrictions and not-in-my-backyard activists.
The FHFA’s inclination towards using rent control as a remedy is ill-advised and far more complex than it appears. In the academic community, studies prove that rent control hampers new housing development, restricts supply and hinders upward mobility. Moreover, research reveals that rent control discourages housing providers from investing in the existing housing stock, leading to a decline in the quality of available rentals.
With nearly 20 years of real estate management experience, I understand that instituting federal rent control will only hinder development − which is essential for keeping up with growing rental demand. In Ohio, there is a shortage of approximately 270,000 affordable and available rental units to the 448,000 extremely low-income households. And according to the Ohio Housing Finance Agency, vacancy rates for rental housing are extremely low and the gap between supply and demand for housing is widening.
Addressing these challenges is elementary economics: As the demand for housing exceeds supply, prices will increase until the quantity demanded equals the number of housing units made available. Surprisingly, the biggest beneficiaries of rent control are not even the low- to middle-income renters struggling with housing costs.
In the few states where rent control exists, well-off renters who don’t need financial assistance are taking advantage of the system, occupying their apartments longer than they otherwise would. Studies indicate that these financially capable renters, rather than helping thousands of impoverished families find suitable housing, contribute to the scarcity of available units.
To address this problem, Gov. Mike DeWine signed Ohio House Bill 33 on July 4, which created a new low-income housing tax credit program (the “Ohio Credit”). This program provides qualified low-income housing projects with credits that stimulate development, as the current rate of new construction has not kept up with rental demand.
While the solution to Ohio’s housing affordability crisis may appear to be cut and dry at first glance, the FHFA would do well to avoid the allure of rent control as an easy solution. Instead, policymakers should prioritize addressing the state’s housing shortage. This supply shortfall lies at the root of the housing crisis and must be tackled with research-based policy.
M. Don Brunner is President and CEO of Cincinnati-based BRG Realty Group. He is also served as 2022 Chairman of the National Apartment Association.