Another city considers self-destruction

 Why do otherwise smart-seeming people continue to be drawn like moths to the flame of the bad policies of rent control (aka rent stabilization)?  Stupidity. Willful Blindness.  Ignorance.  

Hatred for the Snively Whiplash class known as greedy, bloodsucking landlords.. The Marxist belief that no one should own property, especially housing. Stupidity.  

Yet here they go again - this time the voters of St. Paul are poised to vote on implementing an extreme rent control law that makes Oregon’s dastardly statewide regulations look mild.  Rent control in any form should be illegal as it creates the exact opposite effect on housing availability than it intends. There is also the question of how this squares with the property rights of the landlord, but that is another subject - the most basic of rights that seems to be forgotten by everyone but the minority who are being harmed - the landlords.  Although a very few people benefit at the expense of private business owners, the housing supply shrinks and all other housing becomes more expensive.  Did I say stupid? One-dimensional thinking.

Read previous posts on Rest Control by typing in “Rent Control” in the Search This Blog box at the bottom of this page.  Check out my favorite, “Quiz - Bombing or Rent Control?”

From The Concise Encyclopedia of Economics:

Rent Control

By Walter Block

Rent control, like all other government-mandated price controls, is a law placing a maximum price, or a "rent ceiling," on what landlords may charge tenants. If it is to have any effect, the rent level must be set at a rate below that which would otherwise have prevailed. (An enactment prohibiting apartment rents from exceeding, say, $100,000 per month, would have no effect since no one would pay that amount in any case.) But if rents are established at less than their equilibrium levels, demand will necessarily exceed supply, and rent control will lead to a shortage of dwelling spaces. Absent controls on prices, if the amount of a commodity or service demanded is larger than the amount supplied, prices rise to eliminate the shortage (by both bringing forth new supply and by reducing the amount demanded). But controls prevent rents from attaining market-clearing levels and shortages result.

Economists are virtually unanimous in concluding that rent controls are destructive. In a 1990 poll of 464 economists published in the May 1992 issue of the American Economic Review, 93 percent of U.S. respondents agreed, either completely or with provisos, that “a ceiling on rents reduces the quantity and quality of housing available.”1 Similarly, another study reported that more than 95 percent of the Canadian economists polled agreed with the statement.2 The agreement cuts across the usual political spectrum, ranging all the way from Nobel Prize winners milton friedman and friedrich hayek on the “right” to their fellow Nobel laureate gunnar myrdal, an important architect of the Swedish Labor Party’s welfare state, on the “left.” Myrdal stated, “Rent control has in certain Western countries constituted, maybe, the worst example of poor planning by governments lacking courage and vision.”3 His fellow Swedish economist (and socialist) Assar Lindbeck asserted, “In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing.”4 That cities like New York have clearly not been destroyed by rent control is due to the fact that rent control has been relaxed over the years.5 Rent stabilization, for example, which took the place of rent control for newer buildings, is less restrictive than the old rent control. Also, the decades-long boom in the New York City housing market is not in rent-controlled or rent-stabilized units, but in condominiums and cooperative housing. But these two forms of housing ownership grew important as a way of getting around rent control.

Economists have shown that rent control diverts new investment, which would otherwise have gone to rental housing, toward greener pastures—greener in terms of consumer need. They have demonstrated that it leads to housing deterioration, fewer repairs, and less maintenance. For example, Paul Niebanck found that 29 percent of rent-controlled housing in the United States was deteriorated, but only 8 percent of the uncontrolled units were in such a state of disrepair. Joel Brenner and Herbert Franklin cited similar statistics for England and France.