Rent Control Hurts Everyone. Here’s How!
Rent control doesn’t work. Everywhere it has been tried, it fails. Economists from the left of the political spectrum to the right agree that rent control reduces both the amount and the quality of housing available.
Liberal economist, Paul Krugman writing in the New York Times states the failures of rent control are “the best-understood issues in all of economics”. Libertarian conservative economist, Thomas Sowell said in Townhall that “[s]tudies show that rents are usually higher and homelessness is greater in cities with rent control”.
But how does that play out in the real world? In this article, I will take a look at exactly how rent control hurts everyone.
How Rent Control Hurts The Poor
In New York, for example, the supply of rent controlled apartments is limited. This is because only older buildings are covered by rent control, as adding rent control to new builds would disincentivise the building of new homes.
Accessing a rent controlled apartment is all about who you know, explains Jim Edwards writing for Business Insider.
With a high demand for properties which are rented below market rates, landlords can afford to be extremely selective in their choice of tenant. As apartments can be passed on between tenants this also means the well-connected have a better chance of getting one. The poor are not often a landlord’s first choice and are often not as well-connected as the rich. This means the cheaper, rent controlled properties, end up in the hands of people that can well afford to pay.
Edwards went on to explain, “…none of the people I knew in New York who lived in rent-controlled apartments were poor…They were simply people who knew someone (who knew someone) who hooked them up with a sweet deal.”
Landlords cannot afford to keep properties on the market at these low rates and therefore, whenever they are able, sell them or convert them. This means that there is a lower supply overall. This reduction in supply pushes up the cost of all non-rent controlled property.
As the poor have a hard time accessing rent controlled apartments, it is their rents that are hit hardest by the lack of supply.
How Rent Control Hurts Tenants
But that’s not to say it is good for the tenants who manage to get rent controlled apartments either. Landlords can’t afford to keep rent controlled tenants and will use every means inside (and sometimes outside) the legislation to get them to leave. For example, the New York Times wrote about the experience of tenants in one rent controlled building noting that CCTV cameras were put up focused on the rent controlled apartments and extensive, and excessively disruptive, building work was done in empty units. This led to a 70-year-old tenant being awoken to a leg dangling “from a hole punched through her ceiling”.
In a separate article in the New York Times, Dw Gibson claims “[a]ltering or destroying a building in order to make it unsafe is the method of choice for many property owners operating in some of the city’s most rapidly changing neighborhoods.”
These articles blame the lack of regulation, not seeming to understand that this is a direct consequence of forcing landlords into a non-consensual business arrangement. No matter how many regulations are implemented, you cannot force someone to provide a service they do not want, or cannot afford, to provide.
Even where such tactics are not used, landlords cannot afford to conduct maintenance. Walter Block writing in the Library of Economics and Liberty’s Online Encyclopedia of Economics says, “[t]he sitting tenant is “protected” by rent control but, in many cases, receives no real rental bargain because of improper maintenance, poor repairs and painting, and grudging provision of services.”
How Rent Control Hurts Landlords
In this debate, the class that receives the least attention and sympathy is the landlord. Some may think that all landlords are rich or that they do very little for their money. Nothing could be further from the truth. Smaller landlords, many of whom own property as an alternative to a pension, often only make a minimal profit from their properties even in a free market. With rent control, these landlords lose money.
Rent control also hurts responsible landlords the most, as those that do the necessary repairs and follow the safety regulations have the income they receive from the property cut even further. Irresponsible landlords will be able to cope with rent control, however, as they simply won’t conduct maintenance.
Act Now
The Mayor of London wants to bring in rent control, however he needs permission from the Government to do so. We need to get the government to refuse him permission. I have therefore set up a petition to get the government’s attention. All UK citizens can sign it. We need 10,000 signatures to get them to respond. That’s why I need your help. Please sign and share this petition with everyone you know, and together we can stop this devastating policy from hurting the people of London.
https://petition.parliament.uk/petitions/586442
