MIT researchers are adding to the debate on rent control with a new paper on the relationship between rent control and crime. While many people feel rent control keeps people off the streets and away from a life of crime, this study found that by eliminating rent control, the city of Cambridge, Massachusetts, experienced substantially reduced crime rates along with billions of dollars in benefits to the city.
The Massachusetts Institute of Technology (MIT) is located in Cambridge, but that’s not why researchers used Cambridge as their study subject. They analyzed Cambridge because the city went through a unique transition from strict rent control rules to a sudden abolishment of the rules in 1995. That gave them information on crime rates and other data before and after the rules were eliminated.
The rules only applied to older non-owner occupied rental homes, condos, and apartments built before 1969. Those units tended to be clustered together in certain areas. Overall, about one third of the units in the city were subject to rent control rules.
City’s Sudden Drop in Crime
They say from the time rent control was abolished in 1995 to the year 2005, there was a 16 percent decrease in the total number of crimes. That represents a reduction of about 1,200 crimes a year across four categories including property crimes, public disturbances, drug and alcohol crimes, as well as violent crimes. Of that total, about 77 were violent crimes. The most common crimes were property crimes, like burglary, shoplifting, arson, and public disturbances, like assault, vandalism, trespassing, prostitution, and illegal possession of a firearm.
By lifting those rules, researchers say rent control depressed home values, and gentrification helped bring home values back up. But, they say, gentrification can work both ways in regard to crime.
Gentrification & Crime
When a neighborhood gentrifies, it typically attracts more affluent residents who may be more likely to fix up their homes and install security devices. Upgraded buildings also tend to eliminate the “broken window” theory that run-down buildings attract criminals.
When buildings and neighborhoods are maintained, home values increase, along with property taxes and, when a city raises its property tax revenue, it has more money to pay its police force and fight crime. Wealthier individuals may also invest in neighborhood businesses that might employ those who have turned to crime in the past.
Researchers say, on the other hand, wealthier individuals could also become targets for robbery and theft, which would attract criminals and raise crime levels. A neighborhood turn-over of residents due to gentrification may reduce “social cohesion” which could also breed crime. So, there are complicated forces at play.
Demographic Changes in Cambridge
After rent control was abolished, researchers say there were several significant demographic changes in Cambridge. They say resident turnover increased, property values rose, landlords invested more money into deregulated units, and rents jumped 40 to 80 percent during the next ten years for previously regulated units. But that jump is not surprising because rent levels had been artificially suppressed at 1969 levels by the rent control rules.
Researchers say the city experienced population growth. It attracted a more multi-racial mix of residents with bigger paychecks and better education. They say the share of white-collar workers increased by almost 25 percent. The study also had a control to determine if this change had started to happen “before” the deregulation took place.
Researchers say they were able to make comparisons between areas with a higher-density of rent-controlled units, and other areas of newer buildings that were exempt. Because cities were trying to improve public safety during the 1990s, and efforts to reduce crime could skew the results, researchers compared their results to crime statistics for other cities.
They used FBI data from 147 other cities with similar populations to investigate any increase or decrease in crime. They took into consideration a neighborhood’s proximity to things like public transit or public housing and whether that influenced crime rates.
There are very few rent-controlled municipalities in the U.S. to study the effects of these regulations on crime. According to the National Multifamily Housing Council, just “four” states have rent control including California, Maryland, New Jersey, and New York. But with rising home prices in some markets, forcing rents higher, there’s a renewed call for rent control in some places.
The argument in favor of rent control says that rules are needed to keep housing affordable. But it often does just the opposite, because rents will then go higher in unregulated apartments, and the rent-controlled apartments will get less attention from landlords, bringing their value down, along with the value of the neighborhood. There’s also less turnover in rent-controlled units, because people don’t want to give them up — even when they can afford something that costs more. Leaving other potential renters with fewer choices. Rent control is also a disincentive for developers, who’d prefer to go elsewhere to create more housing.
Monetary Value of Reduced Crime
As for the monetary value of rent decontrol — Researchers have estimated that property values increased about $2 billion, and the overall benefit to the city was $10 to $22 billion, over ten years. The value they assigned to each crime went from $1,291 in 2008 for a public disturbance to $47,000 for a violent crime.
This article was originally published at Real Wealth Network on October 18, 2017.
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Kathy Fettke is the founder and co-CEO of Real Wealth Network. She can be reached at email@example.com.