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In this month’s edition of Brewing Data, we will continue the conversation around rent control policies. In last month’s edition, we cited Leah Cuffy from the NAA’s position on rent control as well as nominee for Mayor of New York City, Zohran Mamdani’s public statements. You can view that blog here.
A recent joint study conducted by the Department of Economics at the University of North Texas in collaboration with Carey Business School of Johns Hopkins University titled Does rent control increase tenant unemployment? posits that rent control increases resident unemployment.
You can find their report here: Does rent control increase tenant unemployment?
The main hypothesis is that disincentivization from finding employment is the primary explanation of correlation between unemployment rates with rent control policies. Using data from NYC between 2002 and 2017, there is evidence that suggests that rent stabilization increases tenant unemployment by more than 4%.
We can intuit as a generalization that several factors can affect job searching incentivization: unearned income (UI) such as unemployment benefits, personal savings, and costs of living. Additional financial resources and safety nets can make residents more selective in their job search, affording them the flexibility to forego suboptimal opportunities, continuing their period of unemployment, while only seriously considering more appropriate job matches.
The U.S. Census Bureau conducts the New York City Housing and Vacancy Survey (NYCHVS) every three years. This regular survey provides detailed information on housing units in NYC. The datasets from 2002, 2005, 2008, 2011, and 2017 serve as the primary data set for the study. 2014 was notably excluded due to inconsistencies in the variable which importantly identifies when residents moved into their units.
Their findings suggest that “rent stabilization’s unemployment effect is more pronounced among households with unearned income.” However they also disclaim that a major limitation of their analysis is a lack of data that track residents before and after periods of unemployment. They repeatedly caution that other omitted resident or local characteristics could still impact the observed effects and acknowledge the necessity for further study.
As well this isn’t an inherently negative finding. If residents paid lower rent or received higher unearned income then they would feel less pressured to immediately find/accept a new job.
Another meaningful question to ask is if rent control policies impact homelessness rates. The demographics of unemployed and unhoused individuals is not 1:1. In fact, a 2018 study with authors representing University of Chicago, University of Delaware, Utah State University, and University of Pennsylvania titled Employment and Earnings Trajectories During Two Decades Among Adults in New York City Homeless Shelters found that 45% of homeless single adults and 38% of homeless adults in families were employed.
You can read the study here: Employment and Earnings Trajectories During Two Decades Among Adults in New York City Homeless Shelters
Rent control policies have been employed by local governments in an effort to maintain affordable housing. However, the additional impacts deserve further examination. There are many variables that interact with each other – including but not limited to rent freezes, income, employment, and housing supply.