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Robert P. Murphy ( consultingbyrpm.com) is a research assistant
professor with the Free Market Institute at Texas Tech University, and the
author of Choice (Independent Institute, 2015).
ALTHOUGH ITS proponents believe that rent
control is a good way to
provide affordable housing, basic economics
shows that it actually
hurts the very people it
In 2012, a panel of 41 distinguished economists from across the political spectrum was
asked to evaluate this (edited) statement: “Local
ordinances that limit rent increases have had a
positive impact over the past three decades on
the amount and quality of broadly affordable
rental housing.” Only 2 percent of the respondents agreed, while 49 percent disagreed and an
additional 32 percent strongly disagreed.
To understand why there is such near-uni-versal rejection of rent control among economists, it’s necessary to first recognize what the
“market-clearing price” is. If the government
stayed out of it, landlords and tenants would
collectively establish rental prices to balance
supply and demand. In this context, what happens if politicians swoop in and force landlords
to accept lower prices than what the market
would have set?
At the artificially lower price, sellers won’t
want to provide as many units to the rental
market. For example, investors who were con-
sidering building a new apartment complex
might decide that a parking garage makes more
financial sense if their revenues are capped.
On the other hand, if apartments are made
artificially cheaper, then tenants want to rent
more apartments. For example, two friends may
decide to split one unit if the rent is $800, but
decide to live separately if the rent is only $500.
Now put the two concepts together. Rent
control (a) reduces the supply of apartment units
on the market, and at the same time (b) increases
the demand for apartment units. This is a recipe
for shortages, where frustrated individuals can’t
find a place to live.
Without the option of letting tenants bid up
the price, landlords might use less-subjective criteria to pick the winners, such as people who
speak the language or are in the “right” social
group. Furthermore, landlords won’t be eager to
fix the water heater or put on a fresh coat of
paint, because a line of people will be waiting to
move in at the artificially low price. The popular
notion of a “slumlord” is the fault of rent control.
Rent control reduces the total number of
apartment units and makes it difficult for the
truly disadvantaged to find a place, period. It is a
bad policy that delivers results opposite from
what its supporters intended. C
Kshama Sawant ( kshamasawant.org) is a two-term member of the
Seattle City Council.
IN SEATTLE, out-of-control rents are gentrify-ing our neighborhoods
and pushing working
people and people of color
out of the city. More than
40 percent of our city’s
residents are now rent
burdened, meaning that they pay a larger proportion of their income on rent than is affordable or sustainable.
As in other cities, there has been a growing
debate about how to confront the affordable
housing crisis. Developers and their lobbyists tell
us that we need only rely on the so-called free
market, that housing affordability is a simple
problem of supply and demand. They say that if
we stand back and let developers build, the supply of market-rate units will increase, and then
prices will fall.
Only this is not what is happening. As a matter of fact, construction has been booming in
Seattle and many other urban centers. The problem is that, left to their own devices, developers
generally maximize their profits by building
high-end units. And rather than lowering rents,
such development tends to drive up prices in a
given neighborhood, as existing affordable housing on the market is torn down in the process.
Rent control is simply a policy that estab-lishes reasonable limits on how quickly a landlord can raise the rent, while still allowing
landlords to perform maintenance and make a
profit. It can help stabilize communities by preserving affordable housing, and give renters
some protection from real estate speculation and
While not a magic bullet, rent control has
been a lifeline for working people in almost
every city where it has been implemented. More
than 200 municipalities across the country have
some form of rent control regulation. One of the
most common myths about rent control is that it
will reduce construction and housing supply.
There is no direct link between rent control laws
and slowdown of new construction. The two
largest building booms in New York City’s history occurred in periods of strong rent control—
first in the 1920s and again from 1947 to 1965.
The main determinants of housing development
are macroeconomic factors linked to the boom-and-bust cycles of capitalism.
Working- and middle-class people who are
being effectively evicted by unaffordable rents
have a right to put their needs above the profits
of wealthy developers. They have a right to insist
on policies that will promote the retention and
creation of affordable housing. C
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