Rent Control

Christian Britschgi had an article in Reason online last week about rent control, and in particular the one-way ratchet. Rent control has been enacted, or is under discussion, in various jurisdictions, and once it is enacted, it tends to become tighter. If protecting tenants from a ten percent rent increase is good, how much better to protect them from even a five percent increase. The end of that game, as economically literate people know, is that little or no new housing is constructed, and that landlords may be driven to abandon or burn down existing buildings, or hire hoodlums to drive out the tenants, so that they can go condo. Tenants usually have more votes than landlords, and people elsewhere who might like to move to a city and get a good job there, but can’t because rentals are not to be found, don’t get a vote.

That’s a public choice explanation of why politicians are not generally eager to end rent control, and are motivated to make it more stringent. I would like to say, though, that agitation for rent control is at least understandable. A tenant finds that her greedy landlord is demanding a substantial rent increase, much more than the increase in her salary, if she was lucky enough to get any, so it’s natural for her to want rent control. She knows that something is wrong, but hasn’t read Henry George, and doesn’t understand that the wrong kind of property tax, punishing people for erecting buildings while failing to discourage land speculation, is at the root of her problems.