Controversial Rent Control Falters

PRINCE Frederick of Denmark almost received a royal bargain early this summer. Harvard University planned to lodge the Danish crown prince, who is a visiting student, in a plush, four-bedroom house. Not only was the house in a prime location near Harvard Square, but - best of all - its rent was kept artificially low by a city rent-control law.

After an angry Cambridge City Council asked Harvard to settle its royal visitor elsewhere, Prince Frederick voluntarily agreed to live in student housing.

But highly publicized cases like the prince's have embarrassed even some rent control advocates, who defend the regulations as necessary to prevent low-income tenants from being evicted. Backlash fueled

The cases have helped fuel a backlash against the laws in many of the approximately 200 communities - most of them in California, Connecticut, Massachusetts, New Jersey, and New York - that adopted rent limits in the 1970s.

* In Berkeley, Calif., a bastion of liberal activism, voters elected a moderate slate to the rent board in 1990. Since then, the board has approved the largest rent increases in the history of Berkeley's 12-year-old rent-control statute. A ballot initiative that would have rolled back the higher rents was defeated on June 2.

* In San Francisco, voters in 1991 decisively rejected a "vacancy control" measure that would have toughened the city's rent-control regulations. The existing law limits rent increases on current tenants, but allows landlords to charge the market price to new renters.

* In Brookline, Mass., voters decided in 1990 to gradually phase out rent control. The initiative was passed by homeowners angry at the fact that they were having to pay an ever-larger share of the city's property taxes because rent control was keeping down the cost of apartments.

Here in Cambridge, rent-control opponents have little hope of winning at the polls. Seventy-seven percent of Cambridge residents are renters, and there is a solid pro-rent control majority on the city council.

So Cambridge landlords have turned to the courts for relief. An initial hearing is scheduled Friday in Middlesex County Superior Court on a lawsuit charging that the Cambridge rent statute represents an unconstitutional taking of property.

Although the United States Supreme Court upheld the constitutionality of Berkeley's rent laws, Cambridge landlords are optimistic about the outcome of their suit.

First, the Cambridge statute is even more restrictive than Berkeley's. In Cambridge, for example, landlords frustrated by low rents cannot simply leave their apartments vacant; the city fines them heavily for doing so. Second, the Supreme Court is more conservative today than the body which upheld Berkeley's law in the early 1980s.

"We can't take it anymore," says Denise Jillson, a leader of Cambridge's Small Property Owners Association. "If the courts throw out [the suit], I don't know what we'll do. We can't live and maintain our buildings for rents [as low as] $200 a month."

The backlash against rent control is based, in part, on a number of recent studies that show it has had a negative impact.

A 1991 study by the US Department of Housing and Urban Development linked rent control with increases in homelessness - allegedly because rent ordinances reduce the number of apartments available for rent. Assessed values lowered

The same year, the Citizens Budget Commission found that in New York City, which has regulated rents since World War II, the law "deters investment in new housing, discourages maintenance of existing housing, lowers the assessed values and tax yields from residential property...."

The New York study also found that rent control "provides a subsidy, from landlords to tenants, which inequitably benefits higher-income households more than low-income households."

Similar conclusions were reached by studies in the late 1980s of rent laws in Cambridge and Berkeley.

The Cambridge study, conducted by Abt Associates, a consulting firm for the city, found that 30 percent of those living in rent-controlled apartments were not impoverished and that many of the other 70 percent were students, who are only temporarily low-income.

For many here, the case of Prince Frederick symbolizes the problems of a rent-control system that is not means-tested.

Among the Cambridge residents who live in spacious, rent-controlled apartments are Mayor Kenneth Reeves, Justice Ruth I. Abrams of the state Supreme Judicial Court, and David Ives, vice-chairman of the board of directors of WGBH, the local public television station.

"The taxpayers are subsidizing a system which they think is dedicated to helping low- and medium-income people," complains City Councilor William Walsh. "But around Harvard Square, you don't find low- or moderate-income people getting [rent-controlled] apartments. They're not all occupied by princes, but they are all occupied by people of means."

Rent-control advocates scoff at these reports. Peter Dreier, director of housing for Boston's Redevelopment Authority, concedes that a disproportionate number of wealthy people have benefited from rent regulations.

But most of the beneficiaries, he argues, are low-income tenants. Housing prices rise

"Boston's housing prices rose by 20 to 25 percent a year during the mid to late 1980s. If not for tenant-protection laws, poor and elderly residents would have been pushed out," he says.

Mr. Dreier is particularly skeptical of studies linking rent control and homelessness. "Saying rent control causes homelessness is like saying the sun comes up because the rooster crows in the morning," he says. "It's a complete fallacy."

Rent-control advocates like Dreier do agree with their opponents on one thing: Few cities in the near future are likely to adopt rent-control ordinances. On the other hand, while existing rent laws may be curbed, few are likely to be repealed outright.

"We'll probably never get rid of it in New York," says William Tucker, author of "The Excluded Americans: Homelessness and Housing Policy."

"Communities that have gotten into rent control often regret it," he adds. "But there's an economic rule that the worse any form of government regulation is, the more distortions it creates, and the harder it is to get rid of it."