Rent Control Is Rotten

The residential real estate market in Cambridge is a peculiar state of forced equilibrium. The tenants aren't moving, the landlords aren't buying and the rents just stay the same.

Owners of Cambridge real estate are sometimes wealthy individuals. But often, they're not. They use their property as a source of income just like other middle class families earn interest on their savings or get dividends from stock.

So why are many financially secure individuals living in fixed-rent apartment while their landlords struggle to make ends meet?

The answer is that the City of Cambridge does not allow property owners to benefit fully from what is rightfully theirs. The city dictates the rent landlords can charge for their property and then lets well-off individuals take advantage of this.

Many of these low-rent tenants--including Cambridge Mayor Kenneth E. Reeves '72, WGBH-TV General Manager David Ives and Supreme Judicial Court Justice Ruth Abrahams--could easily afford market rents. Their apartments, in turn, would command such rents on a free market.

And while Reeves might not be considered wealthy on a salary of $42,000 a year, he can certainly afford a market value apartment.

How much are well-to-do tenants saving at their landlords' expense? A great deal. According to Linda Levine, co-chair of the Cambridge-based Small Property Owners Association (SPOA), one local tax attorney and her husband pay roughly $200 a month for their Cambridge apartment. By contrast, a two bedroom Harvard-owned apartment on DeWolf street runs $1,400 per month.

Meanwhile, landlords like John O'Neil risk losing their property O'Neil, a Cambridge resident, inherited a house in the city from his mother, complete with tenants.

When tenants declared there were code violations and O'Neil did nit have the money to make the necessary repairs, they went on a rent strike. Now he may loss the house.

According to Levine, O'Neil 's story is the rule rather than exception." One little code violation and they can break you," Levine says. "Tenants go on rent strikes and there is no way to get them to pay--only you have no money to make the repairs."

The current rent control system is rotten to the core. Cambridge faces a terrible shortage of living space, and landlords have to incentive to improve their property. Furthermore, there is no motivation for owners to rent to lower-income tenants; they get the same rent from anyone so they might as well rent to the first person who comes along.

Even more outrageous is the reluctance of the Cambridge rent control board to increase the rent by a decent amount from year to year. Indeed, the board usually makes annual adjustments of about one percentage point far less than the rate of inflation. The result is that, measured in real dollars, rents actually fall from year to year!

Basic economic theory points out that the surest way to generate a shortage in the supply of a certain good is no institute a price ceiling. This is exactly what we are seeing how in Cambridge. Fixed rents have aggravated the shortage since people are less willing to rent their property knowing they can only charge minimal rents. And rent control has decreased property values since the prospect of purchasing property to rent out is scarcely enticing.

The City of Cambridge has made a mockery of property rights and is discriminating no clear end save to wantonly transfer value from landlords to tenants without regard to financial status.