Rent control in Detroit just doesn’t add up

Anascent e ort by some Detroit City Council members to call for lifting Michigan’s ban on rent control needs a dose of reality.

Rent control — government-mandated limits on what rent landlords can charge — was banned in Michigan in 1988 under Democratic Gov. James Blanchard as moves were afoot in Ann Arbor and Detroit to impose it. at happened for good reasons.

Rent control and its cousin, rent stabilization that limits how much rents can increase for existing tenants, became popular in U.S. cities in the 1960s and 1970s, and it distorted housing markets where it was imposed.

As one developer told Crain’s, “Rent control is a New York solution to a Detroit problem.” It’s hard to sum it up any better than that.

New York is the classic case, and the effects of rent control there are still seen now. It created winners and losers in the housing market, strongly favoring existing tenants, and putting golden handcu s on tenants who were renting the right place at the right time.

ose winners can nd themselves renting a single room in their apartments for more than the total rent paid to the landlord. is is not the sign of a healthy housing market, and nobody would look to New York as a hotbed of housing a ordability.

Basic supply and demand dictates that if you limit supply of something, that will drive up prices.

And new development in Detroit is hard to build, and getting harder as interest rates and construction costs rise. Making the nancial math work is challenging now, and rent control would be one more di culty added on top of an already di cult equation.

In Detroit, lack of quality housing stock has sometimes been driven by landlords who buy property on the cheap, then milk it for rent without paying for maintenance or property taxes, then let the property go into foreclosure.

It’s tempting to think that a 1980s proposal that wouldn’t let landlords raise rent unless properties are up to code might help with maintaining that housing stock.

But there are already rules that put code requirements on landlords — they are just often ignored, and the city has historically had lax enforcement of them.

Academics who’ve studied housing issues frequently conclude that trying to control housing costs from the top down makes the problem worse in the long term.

If government wants to try to x the problem of housing a ordability, the best bet is to support e orts to build a ordable housing through subsidies to private developers, and make the path to new construction smoother and less costly.

Rapidly rising rents are a real problem, as are the decline of Detroit’s housing stock and bad actors among landlords. Encouraging private investment in new housing is the long-term solution.

MORE ON WJR e value of the 340B program to hospitals

Hospitals throughout our state have the ability through 340B to purchase certain outpatient prescription drugs at discounted prices. ese covered entities include disproportionate share hospitals, critical access hospitals, cancer hospitals, children’s hospitals and sole community hospitals. is list clearly demonstrates the 340B program benets those hospitals that care for our communities’ most vulnerable residents.

Recently, the Wall Street Journal published a story critical of the savings that 340B generates for health systems across the country, including in Michigan. e fact is, without these savings, di cult decisions will be made by hospitals that will impact service lines and the availability of health care in your community. ese savings also contribute to the nearly $4.2 billion in community bene ts that Michigan hospitals and health systems invested in their communities to help people of all ages get healthy and maintain wellness both in and out of the hospital in scal year 2020.

Insurance costs for employer-provided insurance in Michigan are among the lowest in the U.S., according to the RAND Hospital Price Transparency Study; 340B savings allow health systems to provide a full continuum of care while reducing the overall cost of care for patients. If pharmaceutical companies are successful in undermining the program, we will see the impacts on multiple levels ranging from reduced access to higher insurance premiums.

Ohas increased over the last year by assisting covered entities in maintaining access to comprehensive health services as they face skyrocketing increases to drug prices and the impacts of in ation on sta ng, supplies and equipment. e use of contract labor has increased dramatically due to sta ng shortages that predate the pandemic and impact both clinical and nonclinical positions vital for operating hospitals 24/7 year-round. In two years, the statewide cost for just contract labor has increased by nearly $1 billion annually for hospitals.

Hospitals operate on slim to nonexistent margins and lack the ability to react to these price pressures to the same degree as other business sectors. is is due to health care reimbursement rates either being set by government payers or negotiated well in advance with private insurers. To make matters worse, the growth in drug prices is unsustainable, as a report from Kaufman Hall showed hospitals’ drug expense per adjusted discharge increased by 40.6 percent compared to pre-pandemic levels, the largest growth of any measured expense metric.

Michigan has some of the best state-level 340B protections in our country that prioritize access to care for vulnerable patients. e program is funded through drug company discounts and not taxpayer dollars. Reducing the availability of 340B simply means even higher pro ts for drug companies. As the Michigan Legislature begins a new session, it is important to remember that for three decades, the 340B drug pricing program has received bipartisan support and helped hospitals from Detroit to the Upper Peninsula.

In all, 340B maintains access to care, protects the viability of hospitals and reduces the cost of care for patients and ultimately businesses. It provides lifesaving prescription drugs for those in need who may not be able to a ord them. Any act to undermine the program will have dire consequences to the physical and economic health of our communities.