Rent is out of control: After enduring the highest rent hikes in U.S., many Nevadans back rent stabilization laws

For decades, the mere mention of rent control has sent developers and property owners into a frenzy of objections and apocalyptic predictions. The sky, they claim, will fall if landlords can’t boost rents as high as markets will bear.

Nevada politicians, many of whom rely on developers to fund their election campaigns, have been loath to discuss legal limits on rent increases. Tenants can’t compete with the power of real estate industry lobbyists.

But that tide is turning. Workers in the state’s population centers who are fed up with exponential increases in rent are demanding new laws that cap rent hikes. Some officials, meanwhile, are changing their minds about rent control.

“I have never been a fan of rent control, but I’m starting to be a fan all day long, because now, this is just about greed,” said Clark County Commissioner Marilyn Kirkpatrick at a commission meeting in February. Kirkpatrick noted that inflation and reasonable cost adjustments can’t account for staggering rent hikes.

Data from the real estate site Zumper, analyzed by the Nevada Independent, show that over the last five years, median rent for a one-bedroom apartment in Las Vegas went up about 66 percent (from $755 a month to $1,250). In Reno, during the same time period, rents for one-bedroom apartments have soared nearly 91 percent.

Opponents of laws capping rent increases often cite the late economist Assar Lindbeck, who once opined that “short of bombing, I know of no way to destroy a city that was more effective than rent control.” Rent caps, they insist, will further decrease affordable housing options, force tenants into sub-standard living conditions, spur condominium conversions and stifle construction of new rental units.

The backers of rent stabilization policies see skyrocketing increases in rent as a much greater threat to the viability of cities. Working-class people in the Truckee Meadows and all around the nation often spend more than 50 percent of their incomes just to keep a roof over their heads. In Reno, according to the real estate investor site Stessa, rents increased at the highest rate among U.S. mid-size cities, and second-highest overall, from 2019 to 2022. In that time period, the Truckee Meadows saw a 36 percent increase in median rent to $1,624 per month.

It’s a supply and demand problem, but the free market isn’t solving it. Over the last decade, 94 percent of the apartments constructed in Reno were “luxury units,” according to an analysis of data compiled by the market research firm Yardi Matrix. When COVID-19 pandemic eviction moratoriums expired last year, the August edition of the Nevada Realtors newsletter reminded property owners that because Nevada has no rent control laws, “landlords can raise the rent as much as they like, as long as the rent increase does not occur during the current lease.”

---

Rent control on the ballot

In North Las Vegas, union members and their supporters on July 1 submitted a ballot proposal on rent control to the city, but on July 25, city officials ruled that the petition won’t be certified, primarily because the number of signatures was “insufficient.” The union is appealing the decision.

“We will not be deterred,” said Ted Pappageorge, secretary-treasurer for the Culinary Workers Union Local 226.

Pappageorge said the union submitted 3,396 signatures and is confident in their validity. “The city of North Las Vegas is misreading the law as to how many signatures are required,” he said. “We have proceeded on the basis of the law, and the clerk’s advice as we prepared the petition to be circulated.”

Supporters said city voters should be allowed to decide on rent control, which they believe is the only way to bring rent gouging to heel. If the proposal gets on the ballot, it will be the state’s first rent stabilization measure since the 1970s.

“(The proposal is) a campaign for neighborhood stability,” said Bethany Khan, spokeswoman for the Culinary Workers Union Local 226. “Nevadans want and deserve neighborhood stability. Neighborhood stability is good for everyone: long-time residents, senior citizens, first-time homebuyers, parents with children, and local neighborhood businesses.”

The union’s measure would prohibit landlords from raising rents during the first year after a tenancy begins, and at any time after the first year without giving tenants written notice at least 90 days before the rent increase would go into effect. The proposal also would link maximum allowable rent increases to North Las Vegas’ Consumer Price Index; rent increases could not exceed 5 percent per year.

The idea of capping rent increases has wide popular support in the Silver State among residents of every political stripe, according to a recent poll by the Nevada Independent/OH Predictive Insights. The survey, conducted in April, indicated that 65 percent of Nevadans support laws enacting rent-control policies or limiting rent increases when leases are renewed. That support came from 81 percent of respondents who self-identified as liberals, 65 percent as moderates and 53 percent as conservatives.

“Yes, the cities need to jump in (and pass laws),” said Beto Gomez, who works for a landscaping service and lives with three roommates in a three-bedroom house in south Reno. He said his rent has gone up about 25 percent in the wake of three rent hikes in three years. Landlords, he said, are motivated by profit. “That’s why they are landlords,” he said. “We are dollar signs to them, not people.”

There’s no question that measures like the one proposed in North Las Vegas would bring housing stability to Gomez and many other Nevada tenants, but it’s the long-term consequences of rent stabilization that remain a matter of debate.

T. Tran, a Sparks real estate broker and consultant who oversaw that city’s landlord-tenant mediation efforts during the COVID-19 pandemic, said “jumping on the rent control bandwagon, without looking at the long-term consequences” isn’t a solution.

“I understand why people want it,” Tran said. “But the (exponential rent increases) trend started to correct itself in 2018, and by 2019, we began to look like what was a normal market. Then, all of a sudden, COVID threw everything out the window.”

In Reno-Sparks, she said, rent-mitigation laws would further lower the already scant rental housing inventory. Tran cited the example of Saint Paul, Minn., which instituted a 3 percent cap on annual rent increases this year. In the first three months the law was in effect, multifamily building permits were down more than 80 percent from the same period in 2021.

“Putting in rent control is really a short-sighted decision,” Tran said. “…It’s well intentioned; we need to protect people from price-gouging, but the answer is not that now we need to tie the hands of investors and landlords.”

Tran said even the mention of rent control in public forums spurs landlords to increase rents. “Back in 2018, when people went to the Reno City Council to talk about rent control, that’s when we started seeing rents peak, because investors started thinking that if we were going to see rents capped, they’d better get what they can while they could. … And when it is instituted, I think there’s way more evidence that it doesn’t help communities than that it does.”

Susy Vasquez, executive director of the Nevada State Apartment Association, said rising rents are “a supply and demand issue.” She agreed with Tran that the Truckee Meadows rental market was beginning to stabilize in 2018, before workers started flocking to the area to take new jobs at tech firms, and the pandemic hit. “Then we went back to square one,” she said.

Vasquez said “affordable housing is not easy to build; right now, luxury housing is the only type that pencils out for developers without subsidies, without incentives. … We need workforce housing. I think the conversations that we are having now are about how we can make it easier to build affordable housing. We need to streamline the affordable-housing process and come up with incentives.”

The free market, she said, will correct itself if left to its own devices. Once more rental units go online, a stable, normal market will return. Rent control, Vasquez said, may seem like a quick fix, but has “failed miserably” everywhere it’s been tried, and there haven’t been any significant positive effects of rent caps.

---

It works in some places, studies show

Economists shared that view for decades, but current research is more even-handed. In 1946, economists Milton Friedman and George Stigler of the University of Chicago argued that controlling rents resulted in dilapidated properties as landlords neglected repairs and did other things to force rent-controlled tenants out. Their paper was in response to New York City’s strict rent caps, but rent stabilization measures have been more nuanced since then.

Some laws limit rent caps to older properties and link allowable increases to the inflation rates. In Oregon, landlords cannot raise the rent more than 7 percent plus the rate of inflation. For 2020, the maximum rent increase was 9.9 percent. There is no limit to how much the rent can go up after a long-term tenant leaves. In Cambridge, Mass., which had a strict rent-control law for 25 years until it was repealed by voters statewide in 1994, most studies found no significant decline in new construction and documented “clear, short term benefits for the tenants living under the regulation,” according to a paper on Governing.com.

The article noted that about 200 U.S. communities have some form of rent regulation on the books. Most of them are in California, New York and New Jersey. The Urbanist website reported that an Urban Institute literature review in 2019 found the predicted negative effects on housing supply are not borne out in empirical studies. The review was generally positive, the Urbanist noted, but the authors stressed that rent control “should fit into a broader framework of effective housing policies that promote inclusion and limit displacement.”

Still, rent caps remain an anathema to landlords and developers.

Mike Kazmierski, president and CEO of the Economic Development Authority of Western Nevada, said rent control provides relief to some tenants, but results in long-term disadvantages to the community. The solution, he said, is not rent caps, but more supply. “Building, supporting and incentivizing more units ultimately solves the problem of higher rents, because now your rent has to be competitive, or you won’t have anyone in that unit, and you’ll get zero revenue out of it.”

In densely populated communities such as New York City, he said, there are limited ways to increase the supply of rental housing. “There, you don’t have much of an option,” Kazmierski said. “… Because of that, there are places where you can moderate and mitigate the annual cost increases. But as soon as that unit turns over, it pretty much doubles in price. So there have been places where it’s worked in certain ways and in certain environments.”

But in Northern Nevada, “if we shut down development of housing by doing that, which we will, every developer and firm I’ve talked to pretty much says as soon as that happens, we’ve closed the door on something we need more than anything else, which is our housing supply.”

Kazmierski said landlords and investors object to governments regulating what they can and can’t charge tenants to live in their properties: “It’s a government taking,” he said. “It’s taking money away from investors and people who are trying to build housing and giving it to the renters. … If the government is going to do that, they should be part of the solution and pay for it.”

Christine Hess, executive director of the Nevada Housing Coalition, said “the jury is still out” on whether rent control is a solution to runaway rent hikes. “There are definitely downstream consequences,” she said. “It’s a localized decision, and we need to look at how it worked or didn’t work elsewhere. … There are a lot of complexities.”

The coalition, in its policy forums, has been discussing various solutions to the housing crisis, including developer incentives and subsidies for tenants. Rent control could be a piece of that, she said, but advocates need to look at all the downstream effects of rent caps and what unintended consequences may result. Yet, she said, the free market alone won’t solve the problem.

“Affordable housing does not build itself,” Hess said. “It takes incentives; it takes subsidies; and it takes communities coming together to prioritize housing that’s affordable for working Nevadans, seniors and certainly for our most vulnerable population. … We all have to be at that table. It is not OK that Nevadans are paying more than half their income for housing costs.”

Tenants, however, aren’t concerned with economic development when rents rise above their ability to pay and still meet their other expenses. Gomez, the tenant from south Reno who weathered a 25 percent increase in rent since 2019, said the trend toward luxury housing and high rents is the biggest threat to a diverse, balanced community.

“Affordable housing does not build itself. It takes incentives; it takes subsidies; it takes communities coming together to prioritize housing that’s affordable for working Nevadans, seniors and certainly for our most vulnerable population. … We all have to be at that table. It is not OK that Nevadans are paying more than half their income for housing costs.” Christine Hess, executive director of the Nevada Housing Coalition

“(Tenants) should show up at every council meeting and keep fighting for rent control until they do something,” he said. “Just keep pounding away at it.”

That’s the sort of attitude that alarms developers: “As soon as the words ‘rent control’ come out of an elected official’s mouth, our community becomes less attractive to people in the building industry,” Kazmierski said. “You automatically get a pullback in investment; you get a pullback in development; and you exacerbate what is already a painful housing shortage.”

Some Reno politicians have been able to avoid saying those taboo words by maintaining that state law doesn’t grant cities the power to enact rent control laws (although state officials dispute that, saying cities do have the power to adopt affordable housing measures). Eddie Lorton, a candidate for Reno mayor, has said he’s against such measures. Incumbent Mayor Hillary Schieve, who faces Lawton on the ballot in November, also has said she doesn’t favor rent control.

Khan, the Culinary Union spokesperson, said voters should get rent control measures passed while politicians dither. Rent caps, Khan said, are not automatically destined to fail.

“What has failed is the current practice of letting huge out-of-town corporations continue to gouge working people on rent and breaking up our communities and neighborhoods,” she said. “Nevada is unique, and the current situation calls for action urgently. We believe this is the right thing to do at this moment, because it will provide meaningful relief to Nevadans, who overwhelmingly support rent control.

“That’s why the Culinary Union and community allies are advancing an initiative petition to ensure neighborhood stability, where North Las Vegas rent increases don’t exceed the cost of living.”

EDITOR’S NOTE: This coverage was made possible by our readers’ generous donations to the RN&R’s Independent Journalism Fund, which is administered by the non-profit Tides Foundation.