SHAPIRO: Debunking Rent Control

It feels like America’s major cities are falling apart. And that’s because in large part, they are.

There’s only one problem with rent control: it is a giant failure.

That giant failure is rooted in a very simple lie: that landlords are capable of extracting extraordinary rent from tenants out of sheer greed.

That’s not true. Your landlord can’t just charge you any amount that he wants to charge you, because you will move. You won’t just keep living there and paying extraordinary rent if there’s an apartment building across the street charging you lower rents for the same property. As rents rise, developers also typically seek to develop more rental units. It’s supply and demand.

If I can charge a lot of money for rent, then I myself will build another building, or retrofit an old building, or convert condos into apartments. Or, a developer opponent will do the same thing. As the demand rises, the supply will rise to meet it.

Landlords aren’t any different from grocery store owners. They can only charge what the market will bear. They have to compete with the other landlords.

The big problem is rent control drives scarcity. What you end up doing is removing the profit incentive for people to come in and build new apartments. Supply drops; rents rise in all the non-rent-controlled apartments.

As even liberal Brookings Institute says, while rent control appears to help current tenants in the short run, in the long run it actually decreases affordability, it fuels gentrification, and it creates negative spillovers on the surrounding neighborhood.

Nobody builds new apartments.

So here’s the thing: government will subsidize affordable housing. Okay, so you subsidize the affordable housing. What do you think happens next? Well, nobody wants to live next to the affordable housing, so they leave. But then the tax base decreases. So then you have to raise the taxes on everybody who’s left. But then more people leave, and then the tax base decreases again. This is how you drive people out of California.

When Cambridge, Massachusetts, unleashed its rent after decades of rent control, the result was a massive uptick in property values. As Brookings noted, “rent control properties create substantial negative externalities on the nearby housing market, lowering the amenity value of these neighborhoods and making them less desirable places to live.”

When you get rid of the profit margin for landlords, landlords have no interest in increasing their costs. They stop, in many cases, even doing basic maintenance on their buildings. All of this very often makes the apartments worse for tenants, because it turns out when landlords don’t care about the condition of the buildings — because they lose money taking care of the problems — well, tenants are the ones who suffer.

Rent control leads people to stick around in apartments they don’t need just because they’re getting a deal.

So, let’s say that you have a family of four. They get a rent-controlled apartment, and the two kids each have their own bedroom. Well, over time, your kids go to college. They move out. You gonna get rid of that apartment?

Now normally, you might get rid of the apartment because the rent would be so high. Why would you keep paying for extra bedrooms that you’re not using? But, because rent control artificially lowers the price that you’re paying for the apartment, people keep sticking around.

The giant apartments are being occupied by fewer people than need the giant apartment, and the next family that has several kids can’t actually get into the apartment because you’re still there. This only strains supply even more.

According to one study, over one-fifth of all rent-controlled apartments in New York City are occupied by tenants who have the wrong number of rooms for the size of their family.

There are two ways that the Left tries to handle the problem of rents being too high. 

One is that they will pass laws that prevent developers from building more units because they don’t actually want their own property values to drop. And then they will subsidize government-owned affordable housing. This leads to this vast income gap between the people who can afford to live in a city and the people who can’t afford to live in a city, and there’s nobody in between.

The second way they have found is with rent control. You want to know why San Francisco is now all high-tech entrepreneurs and homeless people? Rent control is a big part of that story. Yet in California, Democrats are actually trying to unleash rent control across major cities. Last year, they put it on the ballot.

Even Californians weren’t dumb enough to vote for it.

In New York, the City Council considered a rent control proposal that would heavily restrict landlords’ ability to move rents in response to markets.

Economists broadly agree on the stupidity of rent control. Everybody — I mean everybody, from Thomas Sowell to Paul Krugman — understands that rent control is an idiotic idea. 

But rent control — like raising the minimum wage — is a bad idea that never dies. It’s always easy to rip on greedy landlords. It’s always a lot tougher to recognize that getting rid of landlords doesn’t make rent free; it just means that nobody builds apartment buildings anymore, and there are no more apartments available for rent.

If cities actually wanted to make housing more affordable, there are some things that they could do. The easiest thing would be to remove development regulations.

In fact, the cities that have some of the worst rent issues are the most heavily-regulated cities. Places like Seattle make it incredibly difficult to build new housing. San Francisco has been rated the most over-regulated city in terms of real estate in America. L.A. is in the top ten. Riverside is in the top ten. Is it any wonder that you see 150,000 homeless people in California these days?

In the aftermath of COVID, a lot of folks on the Left have been saying, “Look! For like a year we just blew out the rents. We just said you didn’t have to pay your rent, and it worked out just fine.” That only works so long as people on the other end know they will eventually get the rent. Otherwise, nobody builds new housing units. 

I have friends who have stopped buying into the residential real estate market specifically because they are afraid that the government is going to start forgiving mortgages, and the government is going to start forgiving rent. Once that happens, no developer in their right mind would put money into this process. 

Rent control itself is a bad liberal policy. It makes no sense. It reduces the ability to build new housing units.

Rent control has failed everywhere it’s been tried, from New York City to San Francisco.

The views expressed in this opinion piece are the author’s own and do not necessarily represent those of The Daily Wire.

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