February 8, 2018

IT’S A DEBACLE EVERYWHERE IT’S TRIED, AND YET. . . Rent Control Needs Retirement, Not a Comeback.

According to the Wall Street Journal, rent control seems to be making a retro comeback. Most forms of intelligent life could be forgiven for asking why.

Serial experimentation with this policy has repeatedly shown the same result. Initially, tenants rejoice, and rent control looks like a victory for the poor over the landlord class. But the stifling of price signals leads to problems. Rent control starts by producing some sort of redistribution, because the people with low rents at the time that controls are imposed tend to be relatively low-income.

But then incomes rise, and rents don’t. People with higher incomes have more resources to pursue access to artificially cheap real estate: friends who work for management companies, “key fees” or simply incomes that promise landlords they won’t have to worry about collecting the rent. (One of my favorite New York City stories involves an acquaintance who made $175,000 a year, and applied for a rent-controlled apartment. He asked the women taking the application if his income was going to be a problem; she looked at the application and said, “No, I think that ought to be high enough.”)

So the promise of economic justice erodes over time, as lucky insiders come to dominate rent-controlled apartments, especially because having gotten their hands on an absurdly cheap apartment, said elites are loathe to move and free up space for others.

The longer the rent-control policies remain, the more these imbalances grow.

But politicians only care about the next election, and lots of voters are stupid. But if you want lower rents, allow more construction.