Why Rent Control Will Never Die
I have relatively little to add to a brilliant post by Pedestrian Observations (a fantastic urbanism blog) about the economically and politically toxic nature of rent-control regimes, and the difficulties in transitioning away from them. It’s worth excerpting two big chunks. The first is a good explanation for the path dependency rent regulation creates:
As the gap between the regulated and market rent grows, landlords have a greater incentive to harass regulated tenants into leaving. This is routine in New York and San Francisco. Community groups respond by attacking such harassment individually, which amounts to supporting additional tenant protections. In California, this is the debate over the Ellis Act. The present housing shortages are such that supporting measures that would lower the market rent has no visible short-term benefits, and may even backfire, if a small rent-controlled building is replaced by a large unregulated building.
Here is what is in my mind the key section for understanding the deeper reason why rent regulation battles rip cities apart:
Instead [of market pricing], cities give preference to people who have lived in them for the longest time. Rent control, which limits the increase in annual rent, is one way to do this. City-states, i.e. Singapore and Monaco, have citizenship preference for public housing to keep rents downfor their citizens. Other cities use regulations, including rent control but also assorted protections for tenants from eviction, to establish this preference. Instead of market pricing allocation, there is allocation based on a social hierarchy, depending on political connections and how long one has lived in the city. People who moved to San Francisco eight years ago, at age 23, organize to make it harder for other people to move to the city at this age today.
I’d simply add that this is a classic situation of Polyanian fear of the market. Polanyi’s great insight was that the “free market” was a utopian dream – when left to their own devices, people rarely self-organize into market provision for crucial goods. In fact, when the state intervenes to attempt to bring a market where traditionally goods where provided socially, it generally provokes a violent backlash. Rent control is a great example of this – it creates two parallel systems, one a free-market system and the other where apartments are provided via a social hierarchy primarily based on who was there first. Ending rent control not only can raise prices for the current insiders, but much more threateningly erases a market of their social status. I hadn’t quite ever thought of rent control as “provision via social hierarchy”, but in that light it makes it much more clear the personal rage that the subject inspires.
Anyway, read the whole thing.