The Scourge of Rent Control
econlib.org
econlib.org
Rent control means less development of rentals subject to its control, so local government becomes a developer (i.e., housing authorities).
Rent control and public housing push market-rate housing out of neighborhoods, leading to suburban growth and sprawl, and away from infill densification -- at least for middle- and upper-class buyers/renters.
Once that dynamic is in place, your infrastructure costs rise immensely, which leads to higher taxes, more reliance on state and federal grants, or both.
so you're right, rent control doesn't exist in a vacuum, but exists in response to all the above advantage given to homeowners/investors. let's get rid of those advantages first, then we can unwind rent control.
I would have been priced out of my hometown a decade ago if this apartment which I found on Craigslist didn’t happen to be rent stabilized.
We have learned the hard way that trickle down economic arguments sound eminently reasonable on paper but don’t deliver on their promises if implemented. I don’t believe for a second that “this time it’s different!” when we apply it to real estate.
There is someone who values the apartment more than you do who can't live there, perhaps denying them the chance to be closer to their job or family. Also, you have less economic incentive to take in a roommate, thus denying another category of potential occupant.
In a rent control system, there are winners and losers. I'm happy that it has worked out well for you, but the survivor bias needs to be pointed out.
At least with market rate renting, there is always inventory. Hoping you are in a lucky enough minority to find an apartment doesn't seem like sound policy.
I get incredibly annoyed when I read anglo hottakes on housing these days.
It's a solved problem in other parts of the world, but it doesn't fit the market ideology, so it gets ignored.
- The state does not own much land in US cities. So that means buying existing properties at great expense and demolishing/rebuilding at even greater expense.
- The "veto" ability for existing residents to oppose new projects in the US is incredibly strong. Even existing public housing residents will oppose new ones built near them.
- Construction costs are unnaturally high in the US for a variety of factors - municipal governments can't seem to get out of their own way when it comes to zoning requirements and etc.
For California, they ended up paying $1 million dollars per unit! Much more than they would have just buying existing properties for individuals.
I don't think it's a problem of "market ideology". I think it's easier to prescribe it as a general policy failure. Vienna has a set of favorable circumstances that are not easily duplicated to other urban areas, and places like China can just ignore legal rights of their citizens to build whatever they want.
Vienna does this with lots of success.
It's the biggest landlord in Europe [0] and has the highest quality of living in the world. [1]
[0] https://www.linkedin.com/pulse/vienna-europes-biggest-landlo...
[1] https://www.independent.co.uk/travel/news-and-advice/vienna-...
My friend just got a 29% rent increase this year.
Their apartment has not been modernised or new fittings for 10 years.
Average rent increase this year for the area is 20%.
There has to be incentives introduced to rapidly build more affordable houses, but any policy that has a negative impact on house prices is a loser to many important voting bases.
Rent control in the short term might have to be done to reign in exploitative landlords.
Except that doesn't seem to work, at least in my state. Housing rentals, like medical care, appears not to respond to "market forces" in a way that actually benefits people who aren't relatively affluent.
Better a small pain now than a big one later.
The beneficiaries are always people who live and vote in the district. People hurt by rent control leave or never show up in the first place.
So barring occasional noble minded YIMBY efforts, once rent control is in effect no one ever has any incentive to change it.
Landlords who want to raise rents might. However renters outnumber landlords, but perhaps not out-donate them.
If the implementation of a good idea always falls apart for any reason then it's a bad idea.
Then your civilization never progresses. Seems like a bad rule of thumb to me.
That's what Vienna does and it's famous for its low-cost, high quality housing.
The city of Vienna is Europe's biggest landlord. It's also the most livable city in the world for something like a decade in a row now.
There are others too, but that'd the most glaring...
The owning class (Both single home owners that live in the house they own AND people who rent out units) already fight against the building of additional supply.
I mean of course, but both are true, it limits supply in just the straightforward way that it means more people can compete in high desirability areas. (maybe it increases demand, not limits supply?) either way it drives prices up.
> https://ichthyoid.writeas.com/price-controls-basic-economics...
The goals and outcomes that this chapter describes far exceeds the goals I have described (maybe oversimplified). To clarify, the outcome desired is prolonging an established balance between fixed income (subsidy) and rent (market force) by artificial control for the specific case of the elderly indigent, which is necessarily capped by senescence.
Ironically, throughout the chapter, politics are mentioned in a myriad of contexts and even highlighted.
> since luxury housing is often exempt from rent control.
Because why? Politics.
Maybe you're asking why or how it doesn't work? It doesn't work because money is in some sense not what's really going on. Sowell's main point in the whole book is that in a free market economy, money is how we allocate scarce resources that have alternate uses. But the real action is the allocation of resources, not the money.
So if you institute rent control, you have not created any more housing. You have not increased the incentive for creating more housing. All you've done is allocate the existing housing a different way. (You've also created a disincentive to pay for proper maintenance on rent-controlled apartments.) You've moved the problem, helping those who are in the right position when rent control is enacted, at the expense of others. (Of course, those who are in the right position become major advocates of rent control, but that doesn't make it a good policy. It just makes it politically popular with the beneficiaries.)
[Edit: I don't have time to plow through the link you provided in your edit/update. But I think that for the specific issue you're trying to address, a pure subsidy might work better than rent control.]
I agree with this. It could work better if only legislation could keep up with inflation, which it doesn't. Hence fixed income is best subsidized by fixed rents.
If you don't trust the legislature, though, you might not trust them to write the rent control legislation in a way where the cure isn't worse than the disease. But you could argue that they only have to get that right once, whereas the subsidy they have to keep getting right. (Though they could plausibly write an inflation escalator clause into the subsidy legislation...)
I still don't think that I agree with you. But you've made a case that made me think, which is about the highest praise I can give to an HN comment.
That was my initial assertion.
> It's always the implementation that falls apart (because politicians).
> But you've made a case that made me think
I appreciate the earnest engagement.
how can politicians be directly to blame for everything bad. Surely majority people are electing this person to do what he/she/they are doing.
I didn't say this, ofc. I think you meant to say, how can they be to blame for the implementation. I think "the why" is obvious in that context. They craft the legislation and vote on it.
> Surely majority people are electing this person to do what he/she/they are doing.
Surely not. Elections are not physical handcuffs, where everything that an elected official is elected for is performed or all expectations are met. Voters largely have to make compromises based on all kinds of circumstantial conditions, like the range of candidates and their records and their sentiments on related issues. You probably know all this, but the phrasing makes me think you don't understand the way democracy works in a practical sense.
Rent control is a niche issue for most people. The result of a rent-control policy is usually nothing a voter can directly notice or measure over a relatively long time, say multiple election cycles. That's why most analyses of rent control are sampled over a years and large populations.
Truly good ideas usually succeed on their own merits despite opposition.
If you have a fixed income _and_ already have a lease somewhere you like and don't foresee any reason to move in the future then (and only then) rent control works in your favor, at the expense of anyone else who is looking to move into or within the area.
And before someone says "Well they can just find another place!", yeah, no, that doesn't work. All the the other landlords are just as scummy.
However, what this means is that housing prices in suburban neighborhoods would drop like a rock, bankrupting the most powerful voting block and richest campaign donors for local and state elections. Such actions would be political suicide in most cities.
So it's not just the landlords squeezing renters, but the property owners who want to enshrine their property values as a right, above and beyond the rights of others to housing.
The way I see it, rent controls are a punishment to the landlords for fighting against the construction of additional housing.
Real estate investment is a cancer. It creates such horrible perverse incentives that prevents a large chunk of the population from every being able to own the place they live. They'll be paying rent their entire lives.
And before someone accuses me of just being a sour renter, no, I own my home. I paid $338K for it in 2015, and it's now estimated to be worth $650K, and I think that's just stupid and bonkers. Many homeowners would probably cheer about that, but all I think about is how expensive all the homes in my neighborhood have gotten. If I was still working the same job I was in 2015, and my salary had merely kept up with inflation, I wouldn't be able to afford the house I'm in now at today's price, and that's just ludicrous to me.