Housing supply skyrocketing means that people were evicted from their homes when their controlled rent increased to an amount they could not afford.
This is a bad thing. Even if you’re a heartless bastard who doesn’t care about the individuals who now have no place to live, people who lose their housing cannot effectively work jobs and support the economy. This negatively affects everyone, even landlords, because being slightly richer in a worse economy will leave you worse off than before.
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We can observe housing supply dropping in places where rent controls were recently introduced like Berlin though.
If you read TFA you would have noticed many landlords refused to rent properties.
The law aimed to provide tenants with more financial security, but by the end of last year, an estimated one in seven homes in Buenos Aires was sitting empty as landlords chose not to rent them out in Argentine pesos. Deposits were capped, and it was nearly impossible to end tenancies early.
Landlords won’t offer rent if the rent is below what they think is profitable. You didn’t read the article, obviously. Rent controls, control price increasation, not the supply of properties that offers rents to tenants. Price controls don’t work. Venezuela did plenty of that, and that doesn’t stop the large waves of migrants from fleeing the failed state.
If the rent is no longer profitable, the landlord’s best interest is to sell the property. They are not compelled to maintain ownership of a building full of unprofitable people.
Unless of course they cannot sell it because others won’t buy it.
Unprofitable for Landlord A means unprofitable for Landlord B.
When property is profitable, housing construction becomes profitable. When housing construction is profitable, housing construction happens.
A free market is based on consent. When people want housing, that is the market force that makes housing worth creating. But only if consent is allowed to happen. Without it, there is no force that transmits one person’s yearning for housing into another’s motivation to construct it.
The government can of course force people to build housing, but the whole thing is less efficient than when everyone is involved in economic interactions they consented to.
If they can’t sell it because nobody will buy it, lower the price. Eventually the price will go low enough for the tenants to buy it themselves. It’s basic economics.
Now everyone involved consents, unlike when the rent is raised on tenants who have no recourse.
…Except that it’s entirely possible that the landlord decides that they’ll sit on the property rather than selling, if they would have to sell at a loss.
Freakonomics did an episode or few about rent control, and how it creates disincentives to building more housing. And, because people know that they won’t be able to find similar pricing if they move, people that want to move, or would move if they could, don’t. Copenhagen is another great example of a city with terrible supply because of the way rental prices are controlled. (Not that rent is controlled at all, but the way that it’s implemented.) Rent controls a la New York City seems like it’s a good solution, but it ends up working quite badly. You can create and manage other incentives to make sure there is enough housing for everyone, at prices people can afford, but rent control simply doesn’t do it.
Freakonomics did an episode or few about rent control, and how it creates disincentives to building more housing
It creates a huge issue. Since the rent is controlled, every new home built would be losing money as a rental. The poor still can’t afford the new home price but nothing else is brought into the market.
Normally, the new homes would rent for more, which would keep the lower-quality homes at a lower price.
IMO, the option that appears to be the most effective for controlling rent is to have housing that is publicly owned, and non-profit. When it’s done well–and it is done well in NYC, for instance–it creates affordable, high-density housing that’s decently maintained. Such housing remains affordable because there’s no profit motive involved in the building or maintenance. On the other hand, it can also be done badly, such as with all of the public housing projects that were built in the 60s and 70s in Chicago; then you have horrible, crime-filled slums that are owned by the city, but have zero maintenance.
Obvs. private industry hates public housing, because they can’t compete with it. But overall, it’s likely the most effective way to ensure adequate housing in urban areas.
They have recourse. They can move or pay the rent.
Funny, I hear homelessness has also skyrocketed.
Cite for that? The article says otherwise.
Rent control is about the only thing most every major economic school agrees is a bad thing. Removing it and seeing positive results isn’t surprising.
It’s surprising to that narrow slice of people who didn’t yet know how markets work, but who are open to the idea.
This is wonderful to hear. Without positive examples, there’s no way to prove to the doubters that free markets do, in fact, work.
To be fair, the issue here is that some parts of the market are free, while others aren’t. If your entire economy is controlled by the state, then this isn’t an issue at all. The state exerting some level of control over all aspects of the economy ends up working pretty well< while a true laissez faire economy very quickly ends up being unfree due to monopolies.