Swedish economist Assar Lindbeck once asserted, “In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing.” Economists disagree on many things, but almost universally agree that rent control is a bad idea. But this hasn’t stopped politicians and housing advocates from calling for more rent control.
Bernie Sanders has called for national rent control. The city of Santa Ana, California, is considering a rent control ordinance. Voters in St. Paul, Minnesota, will soon go to the polls to decide if the city should impose rent control. Dozens of other cities have enacted some form of rent control or are considering doing so. The lessons of rent control’s destructive history have not been learned. Why?
Fundamentally, the reason is the way that the topic has been framed. Advocates of rent control view the issue from a myopic perspective—that of tenants. As one advocate in St. Paul put it, rent control might be bad from the landlord’s perspective, but it is good from the renter’s perspective. And to rent control advocates, what is good for renters is all that matters.
To look at any issue from only one perspective is dropping the context—a willful refusal to consider all of the relevant and available information. Dropping the context means intentionally blinding oneself to the facts. When one evades pertinent information, the resulting conclusions are going to be flawed.
Rent control will provide some short-term benefits to renters. But in the long term, it will be harmful to them. Every city that has enacted rent control has seen its housing supply reduced relative to demand. Rather than submit to arbitrary government edicts, many landlords will withdraw their properties from the rental market. Knowing that their profit potential is limited, developers will be reluctant to invest in new rental housing. Those who live in “rent stabilized” housing will be hesitant to move. To enact rent control in the midst of a housing shortage is like throwing gasoline on a fire.
Rent control advocates base their support on the short-term benefits to a particular group. They ignore the long-term consequences to renters, as well as the consequences to those who aren’t a member of the favored group.
If we want to make the best decisions, then we must reject this framework. In its place we must embrace a framework that looks at the full context. We must evaluate policies, not from the perspective of what is beneficial to a particular group, but what is beneficial to all individuals. And that means protecting the individual’s freedom to produce and trade.