I & I Editorial BoardDo we have to bring up late Swedish socialist economist Assar Lindbeck, who said “in many cases rent control appears to be the most efficient technique presently known to destroy a city – except for bombing”? Yes, we do. Joe Biden made us.
The White House is not proposing a federal rent control law. Even that would likely be too much for this runaway administration that has twice defied the U.S. Supreme Court and forgiven student loans. What it has done is place a 10% cap on rent increases on government-subsidized properties with low-income tenants
It’s a change in how the cap is calculated, so it’s not entirely new ground. But it’s nevertheless a form of rent control, meaning the bombs are still dropping.
Yes, we’re back to the air raid comparison. And Lindbeck was not alone in making the point with an analogy that is easily understood. After the war, as the communist country struggled economically, Vietnamese Foreign Minister Nguyen Co Thach pointed out that policies that “artificially encouraged demand and discouraged supply” had in effect blown up the capital city, leaving “all the houses” in a state of “disrepair.”
“The Americans couldn’t destroy Hanoi, but we have destroyed our city by very low rents. We realized it was stupid and that we must change policy,” he said.
Why is rent control so destructive? Let’s turn it over for a moment to economist William Anderson:
“Price controls do not decrease costs; they simply shift them. Over time they reduce opportunities for production,” he writes. Of course rent controls follow “the same pattern.”
“Controls destroy incentives of owners to build new rental housing,” and eventually, “shortages develop and the real cost of housing increases.”
Do the numbers back Anderson’s claims? Of course they do.
“Landlords treated by rent control reduced rental housing supply by 15%, causing a 5.1% city-wide rent increase,” says the abstract of a National Bureau of Economic Research working paper, “The Effects Of Rent Control Expansion On Tenants, Landlords, And Inequality: Evidence From San Francisco.”
Since California is the capital of housing woes in this country, let’s go back there again. For two decades California State University, Sacramento, and the Sacramento Regional Research Institute looked into the effects of rent control in Santa Monica and Berkeley. The research turned up no surprises. The rental housing supply fell by more than 8.7% in Santa Monica, and by almost 7.5% in Berkeley.
Rent control also has a negative impact on neighborhood quality. When rent ceilings are in effect, landlords “have strong incentives to neglect maintenance or upkeep, allowing properties to fall into disrepair,” says the Cato Institute. They also simply might not be able to afford to take care of their properties when their income is limited by public policy.
Biden’s latest rent control scheme is not his lone effort to skew the market through government overreach. A little more than a year ago the administration announced “new actions to increase fairness in the rental market and further principles of fair housing.” While not setting a national rent control policy, the executive order directed the federal government to become “involved in numerous facets of property leasing, including limiting rent increases and regulating ways property owners can deal with their tenants who are arrears on their rent or damage their property,” says Anderson.
Biden has lied about his past in so many ways it’s become hard to keep up. He’s been a college football star, trucker, professor, civil rights warrior and stole the identity of a member of Britain’s Parliament. But if he claimed tomorrow to be a bombardier, well, that one would be close to the truth.
— Written by the I&I Editorial Board
Third paragraph from the bottom: “They also simply might be able to afford to take care of their properties when their income is limited by public policy.”
In the context, it doesn’t make sense. Maybe “They also simply might NOT be able to afford to take care of their properties when their income is limited by public policy”?
This is what you see every time politicians try to solve, with more politics, an economic (and PR/polling) problem their own policies created.
Economic problems are best-solved with economic measures. In most cases, the best solution is to let supply & demand, and the “free” market, operate “freely.” Of course, thats too elegant a solution for the Tax & Spend crowd infesting the Swamp.
It is called the Pancake Principle of Public Policy, PPPP.
A problem of many people not educated enough in government schools, public schools, to get good enough jobs to pay rent, so government steps in to add a new regulation, rent control, on top of the festering problem of mediocre to terrible public schools run by government monopolies.
Instead of setting the mission of graduating 100% of the students as well educated, knowledgeable and prepared for their next step up in life, the added pancake of rent control covers up the festering problem of inadequate, poorly performing, and yet very expensive public schools.
Then add all the other pancakes of preferential this and preferential that, instead of a full reform of the inadequate government controlled schools to prepare all students for their next step up.
The Pancake Principle!