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Elizabeth Breitmeyer / Gavel Media

Rent Control Tied to Inflation: Is it the Solution to Rampant Gentrification?

On Saturday, January 28th, the Massachusetts State House saw the largest rally in support of rent control in 25 years, as protestors held a discussion about a new bill proposed in Congress. Limitations on rent have been banned in Massachusetts since 1994, which has since caused an incredible amount of gentrification and displacement. More and more communities that have been established in the city for decades are having to relocate due to astounding increases in rent. Effectively, this trend is replacing the diverse, youthful population that has historically made up the inner parts of the city with older, rich white residents who are changing the landscape and community feel as they move in.

To begin addressing this issue, Representatives Sam Monano and Dave Rogers, as well as Senator Patricia Jehlen, sponsored the first Municipal Rent Control Bill that Boston has seen in years. The bill aims to tie rent increases with changes in inflation as well as impose a cap on rent increases up to 5% per year. Many citizens, including the groups that organized the rally (Homes for all Mass and Right to the City Boston), believe that an inflation-related policy like this is the solution to the rent and displacement crises; however, BC Economics Professor Marco Ericco had a completely different take.

Ericco is an accomplished educator and Ph.D. candidate that has spent his career studying behavioral and macroeconomics. Upon first sitting down with him, he warned me that his opinions on this topic would not align with commonly held views. He began by affirming that he believes this bill would not be ultimately helpful because the 5% cap would not be binding unless there were extreme changes in inflation. Tying these two variables together would just result in an increase in rent similar to or greater than the increase in the price level. In addition, this law "would become useless once contracts could be renegotiated and landlords would charge more for the initial rent payment." He emphasized that this bill would help lower-income people only in short-term economic recessions, but eventually, owners will be able to increase their rent as much as they can to account for increased inflation. Ericco highlighted how these policies will not make changes in the gentrification trend because it is caused by the high demand for skilled workers in low-income areas that results in displacement.

So, then, how are Boston and other cities going to fix this rent problem? Ericco believes it can only be done through fiscal policy that adjusts the interest rate and company diversification. With an increase in the interest rate, he explained, the housing demand will be lower thus so will rent. The only issue with this is that it causes recessions in the short run. His other solution will take more time and money, but it is the only sustainable and lasting option. Errico affirmed that the federal government needs to sponsor the movement of big companies to less congested areas through tax incentives in order to help alleviate the housing market. He also pressed the importance of more companies allowing hybrid work, which gives employees complete freedom in choosing where to live. Hopefully, this can happen sooner rather than later so that big and expensive cities like Boston are able to retain the residents that have always considered it to be home.

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