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Blog > Issues > Property Rights > The destructive power of rent control

The destructive power of rent control

July 12, 2019 I By JAMES BURLING

Bomb damage or rent control? That was the caption under this picture in a 1981 book about rent control across the world. Looking at the photo, it’s impossible to tell the difference.

Almost 40 years later, the story hasn’t changed: outside of wars and natural disasters, rent control is the single most effective destroyer of property and property rights. And yet, in an expression of majoritarian short-sightedness in urban areas, its popularity remains unabated.

PLF has been fighting rent control since our founding because there is no legal, economic, or moral case for this insidious policy. The U.S. Supreme Court first approved rent control in 1921 as an emergency wartime measure, but since then the court hasn’t directly addressed the question of whether rent control is an unconstitutional taking of private property. Because rent control laws often take a landlord’s equity and award it to tenants through reduced rents, a receptive court might well put the brakes on this taking of private property.

All economists who study rent control conclude it is counterproductive. A few years ago, PLF compared rent-controlled communities with neighboring towns that had a free market. We wanted to see whether rent control actually achieved the laws’ stated purpose of helping minority and other economically and socially disadvantaged populations. Without exception, every rent-controlled community had fewer poor and minority residents—that is, the very people the law was designed to help. Study after study shows wealthier and more educated people are better positioned to take advantage of rent control’s guarantee of below market rates. That’s because these populations have the stability to stay in one place for longer periods of time.

Rent control accelerates the deterioration of existing housing stock. Why? Because when landlords cannot recoup significant investments in upkeep and improvement, most will only do what is required to maintain habitability. When that gets too expensive, landlords will abandon their buildings. And forget about developers building enough new units in rent-controlled cities.

There is no economic justification for rent control. Rent control cannot repeal the law of supply and demand in cities, which means higher housing costs that ultimately make it impossible for working and middle-class families to live there. When rent control in major cities is combined with the “keep-it-out-of-my-neighborhood” NIMBYism writ large, we see the result: wretched tent cities filled with the victims of bad policy choices.

With renewed vigor, PLF will continue its fight and look for new and innovative opportunities to take to the Supreme Court.

 

This article originally appeared in the Spring 2019 edition of our quarterly magazine Sword&Scales

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