Rent Control Remains the Wrong Solution to Housing Woes
Rent control is having something of a moment: In Los Angeles, tenants are invoking a law that imposes limits on apartments built on sites where rent-controlled units previously stood. A new rent control ordinance went into effect last month in the Bay Area city of Concord, California. Phillipsburg, New Jersey is considering similar restrictions. And, importantly, the Biden administration recently moved to cap rent hikes in some federally subsidized housing across the entire country.
But reviving bad policy doesn’t make it less dumb than it was in past incarnations.
Affordable Housing Comes at a High Price
“The Biden administration moved this week to limit how much rent can rise in certain affordable housing units across the country,” CNBC’s Annie Nova noted April 3. “The cap applies to units that receive funding from the Low-Income Housing Tax Credit, the nation’s largest federal affordable housing program, according to experts. The National Low-Income Housing Coalition estimates that around 2.6 million rental homes across the U.S. have current LIHTC rent and income restrictions.”
Tenant advocates applauded the move, but it drew criticism, too.
“While well‐intentioned, rent control fails to achieve its primary goal of improving housing affordability for the poor and disadvantaged,” economists Jeffrey Miron and Pedro Aldighieri respond in a piece published by the Cato Institute. “In fact, it often generates unintended consequences that exacerbate the very problems it seeks to solve.”
They point out that restricting the price of housing discourages owners from maintaining and improving their property. It can also make it attractive for landlords to pull apartments from the rental market and put them up for sale as owner-occupied dwellings. Those enjoying deals on housing costs might also find themselves in the equivalent of golden handcuffs.
“Tenants in rent‐controlled units become less mobile to avoid losing access to below‐market rents,” add Miron and Aldighieri.
The authors point to studies finding that rent control has reduced the supply of rental housing in communities as far apart as Cambridge, Massachusetts, and San Francisco. In fact, the use of the City by the Bay to illustrate the failures of rent control has a long history. It was the example offered by Milton Friedman and George Stigler in Roofs or Ceilings?, a 1946 essay on rent restrictions published by the Foundation for Economic Education and recently resurfaced on X by the author Amity Shlaes.
A Tale of Two Housing Crunches
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