A blog post in Pacific Standard seeks to defend rent control- an idea that, as the author admits, is generally detested by economists.
The author writes that “rent regulations give tenants a greater stake in their community and incentivize them to put time, energy, and even money into their homes.” But that’s not necessarily a good thing- in a heavily regulated market, a “stake in the community” means that tenants, like homeowners, have an incentive to engage in NIMBYism. So in a prosperous area rent control hits housing supply with a double whammy- more recruits for the NIMBY army AND less incentive for landlords to invest in housing.
He also endorses the “Unlimited Demand” theory, acknowledging the argument that building more market rate housing creates more affordable housing eventually, but responds: “not in tight markets like Silicon Valley and New York City. ” This claim is of course a self-fulfilling prophecy: people use it to justify opposing new housing, which in turn ensures that supply can never meet demand. (I critique the argument in more detail here).
However, the article does contain one non-silly argument: that rent-controlled cities do occasionally experience building booms (most notably New York in the 1950s). Rent control is a factor relating to housing supply, but not the only one.
So here’s my modest proposal for pro-regulation politicians: a city can adopt rent control to protect existing tenants, as long as they deregulate in other ways in order to promote new construction. So for example, a state law could provide that municipalities could adopt rent control under one condition: no more exclusion of new housing. So if San Mateo County wants to adopt rent control, they can do it as long as all new housing is exempt from all of the city’s use and density restrictions. The absence of zoning makes up for the supply-reducing effects of housing.
This wouldn’t need to be on a citywide basis; a city could create “rent control zones” that had rent limits but were zoning-free. This policy might be workable in gentrifying areas where people are especially worried about displacement.
I’m usually polite about others who have viewpoints that differ from mine. But I just can’t help it with two issues: rent control and minimum wage. Those are two drop-dead stupid policies. I cannot even pretend to imagine what is going through the heads of those who think that these are good ideas.
I think this is a sound idea. The basic principle of rent control is to stabilize the neighborhood; a growing neighborhood cannot stabilize without more supply. In New York City, the idea of entrenched, subsidized residents fighting housing for those who subsidize them is a galling problem and this is a simple deal everyone can understand.