Based on whether one is a renter or a property investor, it is very easy to take a certain stance of rent control. The rather long blog post in Market Urbanism takes the side of the property investor, which makes it a very biased read, but it’s not without it’s merits. The arguments against rent control do make sense. Rent control allows tenants to abuse it and lowers the supply for other potential renters. Yet, i’ve always felt those opposed to rent control had another agenda when they’ve argued against it. Let’s not forget that rent control generally helps those that need the help more and places them more in a position of power (eg. the renters).
According to the blog post, rent control still remains a popular idea in such major states in the U.S. as California and New York (two states where rent prices are most likely to get out of control). But the concept is still a declining one. The blog post lays out many arguments opposing rent control such as the obvious one mentioned above and even more unknown effects like as the growth of discrimination when choosing renters or the decrease of mobility for skilled workers. And despite being mainly pro rent control (I am a renter after all), Market Urbanism brings up some great points. And thus the debate continues…
First visit to your blog – very nice! Thanks for taking the time to read my post with an open mind- I appreciate it greatly. And of course, thanks for the link!
Although I admit my bias towards voluntary economic transactions among willing parties, I did not intend to write the article from the angle of the property investor. In fact, I am a renter in New York City and not a property investor. By hurting the property investor, rent control hurts the future renters of the city because investment in rental housing will decline and thus supply will decline.
Having moved to New York two years ago from Chicago (where there is no rent control), I was shocked how difficult it was to find an apartment in New York. Apartment seekers needed to pay brokers a 15% commission on the first year’s rent to find a place. To make matters worse, available apartments were so scarce they would get rented up the first day they came available. There’s a serious supply problem in New York, yet the city punishes providers of housing and developers of new housing.
Let’s not forget that rent control generally helps those that need the help more and places them more in a position of power (eg. the renters).
That is not a universal truth. Rent control also benefits the wealthy and powerful – look at how many rich stars and politicians have held on to their rent controlled apartments at the expense of everyone else. In reality, rent control only helps one particular group of renters – the current residents who don’t intend to move and don’t mind deteriorating living conditions. Over time, rent control serves to make things difficult for many people who “need the help”, such as families who are up-sizing or downsizing, new immigrants, recent graduates, and newcomers.
The problem all stems from forcing the burdens of affordable housing onto the providers of housing at the point of a gun. Thus, removing the incentive to provide additional housing. Politicians prefer this solution because it doesn’t cost them anything from their budget, and the bad results can be used as a reason to intervene further on the behalf of “affordable housing”. However, if society truly believes in helping renters in need, it should fork over its own cash in the form of housing vouchers. (liberalizing the zoning laws would help too)
I guess I don’t see rent control as contentious among economists (could be my market bias). I would like to offer a friendly challenge: see if you can find an economist who has written coherently in support of rent control. I think the more you look into rent control, the more you’ll loosen your support of it. From the research I’ve done, I’ve gone from being relatively neutral on the topic, to concluding that it is one of the most evil policies a government can enact. And I’m not using the word “evil” loosely. I also encourage you to watch some of videos on my 4 part series on rent control – particularly the microeconomics lessons.
Thanks again. I appreciate your open-mindedness,
Adam
Market Urbanism