Rent Control, Car Crash Economics

P J Manning


If you support the idea of rent control maybe you hate the poor, or you are too stupid to care about the damage a policy that Swedish socialist & economist Assar Lindbeck described as “next to bombing…in many cases to be the most efficient technique so far known for destroying cities” will create, or you work for certain homeless organisations for whom such damage would be a never-ending raison d’etre.
Lack of supply has meant Dublin rents have increased by over one fifth in the last three years, at a time when the incomes of renters have either stayed static or fallen. The mismatch of supply and demand has the commentariat slavering for disastrous government intervention in the form of statutory rent control.


The outcome of rent control is less homes for rent, at greater cost, and lower quality. Fewer apartments are built, less space becomes available and what space is rented declines in quality over time. Rent control creates homelessness by destroying the supply of rental housing. When government decrees a price lower than the market would provide, scarcity is the inevitable outcome. Rent Control is fascist economics: property is ostensibly left in private hands but the corporate state controls and mandates its use.
Rent control benefits those with existing tenancies at the cost of future housing requirements of renters. With existing tenants staying in their rent controlled apartments because they have no incentive to trade down to a smaller space, young families and poor are hurt most as rented accommodation fossilises.
The destruction and fossilisation of rental housing under rent control has a woeful effect on labour mobility, opportunity and life quality for young workers. When homes cannot be rented, as is always the case under rent control, long commutes or unemployment will be the stark choices for those most in need of the chance to start work and accumulate human capital. The essence of the rental market is mobility and flexibility, a quality that rent control destroys.
Every single city that has tried rent control has had similar bad experience. New York lost an estimated 300 000 housing units the eleven years 1972-82 as apartments & buildings were abandoned as being uneconomic and new supply was not created. While San Francisco experiences a decades long housing crisis, just half of the rent controlled housing has a single occupant. Housing makes the cost of living in the city one of the most expensive in the US. Santa Monica, also part of the late seventies wave of activist inspired rent regulation, is now known colloquially as the Homeless Capital of The West. The commentariat cannot point to a single example of rent control success anywhere , ever. Price control has never worked.
Nothing is as permanent as a temporary government programme particularly one which creates a group of voters (those with existing tenancies) who see a loss from its abolition. The very existence of rent control, however horrible its consequences, creates a fear of its abolition; rent control introduced to deal with a temporary problem becomes a permanent fixture.
Bad ideas, particularly bad economic ideas never die. Refuted by argument and exposed by history, the worst and most damaging ideas become zombies, impermeable to sense or reason, trudging on eating brains.
In Kenny’s reshuffle we have been unexpectedly lucky in one regard: new Housing Minister Alan Kelly has not had his brain eaten, he is opposed to rent control. How long can Kelly’s surprisingly sensible stance that supply is the problem, be maintained in the face of a tide of journalistic ignorance, bias and laziness?
Dublin’s housing price inflation does demand action but it is not the action that the commentariat want. Only by allowing the market to respond to price incentives can supply and demand be balanced.
“Planning”, that insane idea that a bureaucrat in an office knows better than the rest of the citizenry, must be reduced to a speedy mediation of private property rights. Regulations that restrict building height, demand an average size above 85sq metres and windows on two sides are a war on the poor and the young, allowing the building only of apartments which they cannot afford. Such daft regulations should be abandoned, allowing the market of buyers and investors to guide apartment size far better than government minister or bureaucrat ever will.

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The consequences of having government mandate a price for a durable good like housing are a slow motion car crash, destruction of housing and possibilities over decades. Since most journalists seem to respond like six year olds to instant emotional stimuli (and accord advocacy organisation spokespersons the deference Catholic Curates once accorded Archbishops) the time scale is the equivalent of geological and a single emotive story outweighs any amount of evidence or rational argument.
The rest of us should view those calling for rent control as viciously ignorant, evidence-ignoring useless idiots with an agenda to make housing scarcer and the poorest worse off. That would help to make their stupidity less fashionable.

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