Thursday, June 7, 2007
What’s the effect of rent control laws? In post-Reagan America, the most common response might be: It constricts the supply the low-cost housing and causes a deterioration in the quality of the same, as landlords avoid money-losing rentals.
But a chief purpose of rent control is to provide “housing security,” according to Barnard’s Greg Smithsimon, in an essay on Planetizen. While economists may fret about the long-term effects of restricting the price of a valuable service, a short-term effect of rent control, the argument goes, is that renters aren’t forced out of their apartments during housing price spikes, such as the bubble that many high-priced American cities have experienced in the past decade. In New York, where inflation has pulled many units of out rent control, new Governor Eliot Spitzer wants to raise the rent control ceiling to cover units costing more than $2000 (an amount that seemed like a “luxury” rate 10 years ago, but not today).
It’s true that rent control provides at least short-term housing security. And it’s also true that the days of envy-creating “subsidies” to long-term renters in Manhattan or Cambridge are mostly a thing of the past, thanks to reforms of the rent control laws. But the goal of policy makers should be to ask: Do the benefits of housing stability outweigh the unwanted incentives of rent control? Economists may scratch their heads over the concept of the “benefits” of housing stability, and but it’s the question that a good policy maker should have to answer …