Rent Control – Is there a Rational Basis for Such a Policy?

As a college town, College Park, MD has some unique or near-unique real estate dynamics.  In recent years, the University of Maryland has transitioned from an acceptably good state university to a world-class institution of higher education and research. 

One of the by-products of this dramatic increase in reputation has been the arrival of students from increasingly affluent backgrounds.  This in turn has driven rents much higher in College Park, creating affordability issues for the underlying population.  Perhaps more importantly, the rise in rents has created incentives for property owners to convert single-family homes into rental stock, reducing community stability and homeownership rates.

To combat this, City leaders proposed a rent stabilization ordinance (i.e., rent control).  Rent control is typically a disfavored approach in the economics’ literature, but our job is not to judge but to analyze.  In the instant case, our mission was to determine whether a legally sufficient rational basis existed for such an ordinance; one that was destined to face legal challenge.

As with all its projects, SPG began by assessing the data characterizing homeownership trends, rents, code violations and the pace of rental conversion.  SPG concluded by determining that the City possessed a legally sufficient rational basis based on the economics of its situation.

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