Are Rents Really Under Control? Evidence from the Los Angeles Rent Freeze

• In Event: Before Evictions: Rental Housing Instability and the Role of Local Regulations

Abstract

As the supply of housing affordable to lower-income renters in the U.S. continues to dwindle, rent regulations have emerged as a possible tool for local policymakers seeking to limit rent increases and contain housing costs for tenants. But how effective are rent regulations in practice as a cost containment mechanism? Economic theory and policy design suggest that tenants should receive financial benefit in the form of lower rents, but empirical evidence on the subject has been mixed. To explore this dynamic further, I leverage the case of Los Angeles, which enacted a rent freeze in March 2020, joining many other cities that approved emergency tenant protections in response to the economic turmoil of the COVID-19 pandemic. During the rent freeze, landlords were not allowed to increase continuing tenants’ rent without approval from the city’s Housing Department. While this freeze was not unique among California cities, Los Angeles’ is exceptional because it lasted nearly four years, expiring February 2024; most other pandemic-era rent freezes lasted less than one. Moreover, the rent freeze coincided with, but was largely independent of, a nationwide post-pandemic spike in rental housing inflation rates. This presents an apt opportunity to test the theory of rent control as an anti-gouging mechanism that prevents inordinate cost increases for households otherwise vulnerable to displacement or financial pressure. I leverage American Community Survey microdata of L.A. County renter households to conduct a difference-in-differences analysis comparing reported rents between tenants in the City of Los Angeles, who are covered under the rent freeze, against similar households living in similar buildings within the larger contiguous urban area. Preliminary results suggest that costs for L.A. tenants in rent-frozen apartments rose somewhat more slowly after 2020 than similar tenants in greater L.A. County. There do not appear to be significant heterogenous effects by race, tenure, or income level. Additionally, costs in rent-frozen apartments increased by an average of 13 percent between 2021 and 2024, showing the policy to be an imperfect cost-containment mechanism for households and showing the need for effective administrative enforcement and oversight.

Author

• Chris Alvarez Campbell, American University
  Presenting Author