Springfield Business Journal Articles

Sarah Delano Pavlik

Rent Control in Illinois?

Rent control involves restrictions on the amount or increase in rent a landlord can charge.  Although it has a longer history, most rent control in the United States came into place during or shortly after World War II or in the 1970's when other price controls were enacted.

There are currently four states with rent controls in effect in some locations: California, New York, New Jersey and Maryland.  The District of Columbia also has rent controls in place.  In states where rent control is allowed, the details are often left to municipalities to adopt their own particular rules.

In New York City, for example, there are apartments subject to rent control and apartments subject to rent stabilization.  Rent controlled apartments generally have the lowest rent, but will be eliminated over time.  Rent control only applies to apartments that were built before 1947 and in which the tenant (or his/her lawful successor) has been living continuously since 1971.  Maximum rents, which are far below market value, are set.  However, once the apartment becomes vacant, rent control will cease, and the unit will be subject to rent stabilization, or, in some cases, removed from all restrictions.

New York's rent control has some absurd results.  According to CNN, "Patricia O'Grady moved to New York in 1955 to pursue a career as an actress. She and three girlfriends found a modest 2-bedroom apartment on the top floor of a four-story, mixed-use commercial building.  They paid $16 a month in rent."  Grady stayed in the unit until her death in March 2018, at which time she was paying $28.43 a month in rent.  After renovations (which are desperately needed), the apartment will rent for $5,000/month.

As noted above, rent controlled apartments in New York will gradually disappear.  In the early 1950's, there were over two million rent controlled apartments.  By 1993, the number was around 103,000.  In 2017, there were about 22,000 rent controlled apartments remaining in the city.

Rent stabilization units are different.  Under New York City laws, rent stabilized apartments are generally those apartments in buildings of six or more units built between February 1, 1947 and January 1, 1974.  Tenants in buildings of six or more units built before February 1, 1947 and who moved in after June 30, 1971 are also covered by rent stabilization.  In contrast to rent controlled apartments, almost half of New York City apartments are covered by rent stabilization.  Under the rent stabilization rules, a landlord can only increase the rent by a percentage determined by the Rent Guidelines Board.  For example, the increases allowed in 2017 were 1.25% for one-year leases and 2.00% for two-year leases.

As a tenant struggling to pay rent, rent control and stabilization can be appealing, however, critics state that rent control causes more problems than it solves.  Per a New York Times article in 2013, "The problem, though, is that these programs actually make the city much less affordable for those unlucky enough not to live in a rent-regulated apartment.  The absurdity of New York City’s housing market has become a standard part of many Econ 101 courses, because it is such a clear example of public policy that achieves the near opposite of its goals. There are, effectively, two rental markets in Manhattan. Roughly half the apartments are under rent regulation, public housing or some other government program. That leaves everyone else to compete for the half with rents determined by the market."

According to the PEW Charitable Trusts, a study by the Stanford Graduate School of Business found that rent control creates both winners and losers — even among renters. Longtime renters who have been living in rent-controlled units benefit greatly from rent control, while newcomers end up paying higher rents because the supply of available units is constricted.

Thirty-five states, including Illinois, have laws prohibiting rent control, Illinois having passed the Rent Control Preemption Act in 1997.  Although it is currently prohibited, Illinois has a history with rent control.  According to the Encyclopedia of Chicago:

In 1919, the [Chicago] city council established a committee that, through 1921 in conjunction with the Chicago Real Estate Board, arbitrated disputes over rising rents. The city council also called on the Illinois legislature to pass a law enabling cities such as Chicago to adopt rent control, an effort that did not succeed.

During World War II, the entire nation, including Chicago, was required to participate in stringent rent controls imposed by the Office of Price Administration. When, in 1946, the federal program ended controls over hotels, including Chicago's substantial stock of residential hotels, the Chicago City Council passed an ordinance returning these dwellings to rent control, only to be overturned by the Illinois State Supreme Court in January 1947. Federal rent control, having eased after World War II, ended in 1953 at the cessation of the Korean War.

In the 1970s, Chicago again found itself subject to federally mandated rent controls (August 1971–January 1973) under the Nixon administration's wage and price guidelines. Thereafter, high rents resulting from peacetime inflation, escalating property taxes, declining construction, condominium conversion, and abandonment led Mayor Richard J. Daley, in 1976, to appoint a committee to consider rent controls. In 1977, the committee recommended against the adoption of controls.

Now, rent control proponents are again pushing for regulation in Illinois.  Recently Illinois legislators have been asking housing experts, landlords and renters to weigh in as they consider lifting the statewide ban on rent control.  Hearings were held in September of 2018, with the focus currently being on Chicago.  A group called "Lift the Ban" collected enough signatures to get a non-binding referendum about local rent control on the November 6, 2018, ballot in three Chicago wards.  In those three wards, there was overwhelming support to allow rent control.

Perhaps most importantly Governor Pritzker has indicated he is in favor of repealing the 1997 Act.  The repeal of the Act, however, is only the first step.  If the Act is repealed, it will be each city's responsibility to enact specific regulations if it wants to implement rent control.  And, in Illinois, that is where things always seem to fall apart.  Once the politicians and lobbyists get in a room, the odds of anything benefitting ordinary citizens usually go from slim to none.

 

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