Local rent control in markets like New York and San Francisco has been in place for many years and to many renters it may seem to have provided 1970 rents in a twenty-first century city. Landlords would no doubt agree. But, like other markets that were price-controlled in the past, there are many hidden consequences to interfering with basic economic laws of supply and demand. One of the biggest impacts created by controlling rents is that new rental projects will never be built. Local planning departments get around this by exempting new multi-family projects from all rent control. This is the only way to get new housing built in cities like San Francisco and New York, other than the city themselves buying the land and building housing. What the exemption does is create new housing at market rents which are generally unaffordable by the very people these controls are meant to benefit. The other problem it creates is it shrinks the rental market. Affordable housing is no longer built except where cities intercede and provide significant funding for the builder and the tenant.
Then there are other consequences that become more serious over time such as lack of maintenance and unit upgrades which may make an apartment unattractive to live in. Painting, landscaping, carpet cleaning and replacement, and safety items are often neglected by both landlords and city departments until forced to do so because of safety or political issues. A worse consequence that can cause greater misery than high rents is that once rents are controlled, upward mobility may be stopped because tenants cannot afford to move.
The better answer is to create a market where builders and owners are encouraged to build or add units. Tax incentives always seem to work to bring wealthy investors in to help solve a problem. It has helped many markets add affordable housing. Allowing additional units where limited by zoning can also serve to add affordable units. Controlling the rent does not do this as we have observed when we have tried controlling prices in other markets like food and grocery items. Farmers refuse to grow crops at a loss. Food producers refuse to bring items to market at a personal loss. What happens is lower quality food is sold; fewer items are marketed for the same previous price; packages get smaller. Governments end up paying the producers with funds provided by taxpayers. Quality suffers drastically. Because it usually turns out to be such a disaster, it is only resorted to in times of war. Most of us haven’t experienced markets in places like Cuba or Venezuela. If we did, we would quickly realize, as the residents there do, it is not a place we would want to live.
National rent control is another absurd idea proposed by uninformed politicians to benefit the lives of Americans. They think that they are helping, but they are not. If we can control rents nationally, then we can control the wages and benefits of those politicians and representatives, proposing national rent control. I’m sure they would welcome this much needed control measure.
1/29/2023