Yeah, rent control is basically universally agreed-upon by economists to be a disaster for a city in the long term. If you want affordable housing, you need abundant housing.
Imagine 2 scenarios and imagine which one has cheaper rent:
There are 9 homes for every 10 households, or
There are 10 homes for every 9 households
It’s not hard to imagine. If landlords have a credible threat of vacancy, that gives the rest of us negotiating power. And negotiating power is power.
The problem is, tenants need a place to stay, while landlords don’t need to provide it. They want to, but they can (mostly) afford to let an apartment sit unrented, especially if they raise the price for the surrounding units. Someone will eventually pay the price.
In a “free” market, those with the capital have power, those that don’t… don’t.
Then tax land. Make landlords sweat if they fail to rent out units.
The solution to housing affordability is all about negotiation power. Currently, tenants in many cities do not have negotiating power because an overall shortage of housing and thus no credible threat of vacancy (and with no land tax, vacancy isn’t enough of a financial loss). Build more housing by making it legal and easy to build housing, tax land, and tenants will have far more negotiating power.
A good example is my city, Montreal. Thanks to being one of the most YIMBY cities in North America, we have far more missing middle housing than any other city of this size on the continent. The result? More power to the tenants, less to the landlords. And the result of this power? Not only is my rent waaaaay cheaper for what I get compared to my sister in Boston (we pay about the same, but she has 3 roommates and lives farther out, while I have 1-br and live right next to downtown in an insanely walkable neighborhood), but I also negotiated down my rent when moving in. The reason I could negotiate down my rent was because the landlord had a credible threat of vacancy, so they’d rather lower rent by a hundred bucks than risk vacancy.
The best solution is for the state to build public quality housing that is well located, and charge rent only based on “cost”.
Vienna did this when they had a socialist government (in the early 20th century lmao), and still to this day since there is so much public housing and the cost to rent is so low, it controls the wider cost. Even non-public housing there is much cheaper than pretty much all cities of its size.
Also, creating laws that desincentivise owning more than 1-2 properties (taxing the shit out of third homes for example, and more for each additional one), or just making it outright illegal.
There’s actually a far more elegant type of tax that would have the effect you desire: land value tax.
In short, it’s a progressive, difficult-to-evade, and extremely economically efficient tax that – both in economic theory and in observed practice – cannot be passed on to tenants. Further, it strongly incentivizes new housing development, heavily penalizes real estate and land speculation, and improves affordability. In fact, it’s so well-regarded a tax that it’s been referred to as the “perfect tax”, and is supported by economists of all ideological stripes, from free-market libertarians like Milton Friedman – who famously described it as the “least bad tax” – to social democrats and Keynesians like Joseph Stiglitz. It’s simply a really good policy that I don’t think is talked about nearly enough.
It reveals that much of the anticipated future tax obligations appear to have been already capitalised into lower land prices. Additionally, the tax transition may have also deterred speculative buyers from the housing market, adding even further to the recent pattern of low and stable property prices in the Territory. Because of the price effect of the land tax, a typical new home buyer in the Territory will save between $1,000 and $2,200 per year on mortgage repayments.
Letting the market decide the rent will not magically create more housing, only make the existing housing in a high-demand place like Paris very expensive. The effect might be that it is easier to find an apartment, but only because you have forced the poor out of the city and moved the housing crisis further away from the city. Of course the landlords would be happy if they could charge some 3000€ per month for a small studio apartment in a dodgy neighbourhood, so of course the economists say this is a good idea, since line go up is good.
Letting the market decide the rent will not magically create more housing
Rent control does not create new housing either. The reason economists basically all say rent control is bad policy is because it drastically reduces the amount of housing that gets built.
If you want more housing, make it legal and easy to build new housing like Japan did. Tokyo is the most populous city in the world, and yet it’s remarkably affordable because it’s very easy and streamlined to build new housing.
In Tokyo, by contrast, there is little public or subsidized housing. Instead, the government has focused on making it easy for developers to build. A national zoning law, for example, sharply limits the ability of local governments to impede development. Instead of allowing the people who live in a neighborhood to prevent others from living there, Japan has shifted decision-making to the representatives of the entire population, allowing a better balance between the interests of current residents and of everyone who might live in that place. Small apartment buildings can be built almost anywhere, and larger structures are allowed on a vast majority of urban land. Even in areas designated for offices, homes are permitted. After Tokyo’s office market crashed in the 1990s, developers started building apartments on land they had purchased for office buildings.
Also, you appear to have a very uninformed view of who economists are and what they value. Economists, like all other social scientists, are academics and scientists. Believe it or not, economists are not a cabal of landlords wanting prices to go up; just about every economist will tell you the dangers of inflation and rent-seeking. You might be surprised to learn the surveyed beliefs of economists:
The majority of surveyed American economists vote for Democrats instead of Republicans
The majority are in favor of environmental protection regulations (EPA)
The majority are in favor of food and drug safety regulations (FDA)
The majority are in favor of occupational health and safety regulations (OSHA)
We conducted a large-sample global survey on climate economics, which we sent to all economists who have published climate-related research in the field’s highest-ranked academic journals; 738 responded. To our knowledge, this is the largest-ever expert survey on the economics of climate change. The results show an overwhelming consensus that the costs of inaction on climate change are higher than the costs of action, and that immediate, aggressive emissions reductions are economically desirable.
Believing economists at large to be just a cabal of greedy capitalists is just as anti-intellectual as MAGA people believing climate scientists to be a cabal of Soros- and Gore-funded fraudsters.
Yeah, rent control is basically universally agreed-upon by economists to be a disaster for a city in the long term. If you want affordable housing, you need abundant housing.
Imagine 2 scenarios and imagine which one has cheaper rent:
It’s not hard to imagine. If landlords have a credible threat of vacancy, that gives the rest of us negotiating power. And negotiating power is power.
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The problem is, tenants need a place to stay, while landlords don’t need to provide it. They want to, but they can (mostly) afford to let an apartment sit unrented, especially if they raise the price for the surrounding units. Someone will eventually pay the price.
In a “free” market, those with the capital have power, those that don’t… don’t.
Then tax land. Make landlords sweat if they fail to rent out units.
The solution to housing affordability is all about negotiation power. Currently, tenants in many cities do not have negotiating power because an overall shortage of housing and thus no credible threat of vacancy (and with no land tax, vacancy isn’t enough of a financial loss). Build more housing by making it legal and easy to build housing, tax land, and tenants will have far more negotiating power.
A good example is my city, Montreal. Thanks to being one of the most YIMBY cities in North America, we have far more missing middle housing than any other city of this size on the continent. The result? More power to the tenants, less to the landlords. And the result of this power? Not only is my rent waaaaay cheaper for what I get compared to my sister in Boston (we pay about the same, but she has 3 roommates and lives farther out, while I have 1-br and live right next to downtown in an insanely walkable neighborhood), but I also negotiated down my rent when moving in. The reason I could negotiate down my rent was because the landlord had a credible threat of vacancy, so they’d rather lower rent by a hundred bucks than risk vacancy.
The best solution is for the state to build public quality housing that is well located, and charge rent only based on “cost”.
Vienna did this when they had a socialist government (in the early 20th century lmao), and still to this day since there is so much public housing and the cost to rent is so low, it controls the wider cost. Even non-public housing there is much cheaper than pretty much all cities of its size.
Also, creating laws that desincentivise owning more than 1-2 properties (taxing the shit out of third homes for example, and more for each additional one), or just making it outright illegal.
Housing shouldn’t be a commodity.
There’s actually a far more elegant type of tax that would have the effect you desire: land value tax.
In short, it’s a progressive, difficult-to-evade, and extremely economically efficient tax that – both in economic theory and in observed practice – cannot be passed on to tenants. Further, it strongly incentivizes new housing development, heavily penalizes real estate and land speculation, and improves affordability. In fact, it’s so well-regarded a tax that it’s been referred to as the “perfect tax”, and is supported by economists of all ideological stripes, from free-market libertarians like Milton Friedman – who famously described it as the “least bad tax” – to social democrats and Keynesians like Joseph Stiglitz. It’s simply a really good policy that I don’t think is talked about nearly enough.
Even a quite milquetoast land value tax, such as in the Australian Capital Territory, has been shown to reduce speculation and improve affordability:
I do like some Georgism myself, not gonna lie. It is also a good solution and its also compatible with even more revolutionary changes to the economy.
Letting the market decide the rent will not magically create more housing, only make the existing housing in a high-demand place like Paris very expensive. The effect might be that it is easier to find an apartment, but only because you have forced the poor out of the city and moved the housing crisis further away from the city. Of course the landlords would be happy if they could charge some 3000€ per month for a small studio apartment in a dodgy neighbourhood, so of course the economists say this is a good idea, since line go up is good.
Rent control does not create new housing either. The reason economists basically all say rent control is bad policy is because it drastically reduces the amount of housing that gets built.
If you want more housing, make it legal and easy to build new housing like Japan did. Tokyo is the most populous city in the world, and yet it’s remarkably affordable because it’s very easy and streamlined to build new housing.
https://www.nytimes.com/2023/09/11/opinion/editorials/tokyo-housing.html
Also, you appear to have a very uninformed view of who economists are and what they value. Economists, like all other social scientists, are academics and scientists. Believe it or not, economists are not a cabal of landlords wanting prices to go up; just about every economist will tell you the dangers of inflation and rent-seeking. You might be surprised to learn the surveyed beliefs of economists:
Further, the largest-ever survey on economists’ views on the climate show an overwhelming economic consensus on climate change:
Believing economists at large to be just a cabal of greedy capitalists is just as anti-intellectual as MAGA people believing climate scientists to be a cabal of Soros- and Gore-funded fraudsters.
Thank you for doing what you do