This article was posted on Thursday, Oct 01, 2015

We’ve all heard the phrase “there ought to be a law,” when we see something happening that we don’t like.  That is just what housing advocates are saying as they watch rents rise during the current building boom.  Their solution is to reach for the biggest stick available; a city ordinance that imposes a cap on how many rents can go up.  Sounds obvious, right?  Don’t like something – pass a law against it.  The problem is that rent control laws are unfair and impractical.  Here’s why. 

Rent Control is Unfair to Tenants 

Backers of rent control think it’s a great deal for tenants.  However, rent control creates apartment lock.  Once people get into a rent controlled unit, the law creates a strong incentive for them to stay because they face a significant financial penalty if they move.  These locked-in tenants may pass up otherwise commonsense choices that would benefit themselves and the community, like moving to shorten a commute or moving so their children can walk to school.

This in turn has two negative effects.  First, apartment lock delays or prevents some new home sales.  Renters who would otherwise become homeowners stay in their price-controlled units, putting off for years or indefinitely the natural time when they would become property owners themselves.

Second, it locks apartment seekers out of part of the normal housing market.  Rent controlled units experience low turnover, reducing options for people who need housing.  In some cities, this effect has sparked morbid tales of desperate apartment shoppers scanning the obituaries to get early notice of units that might open up in rent controlled buildings. 

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Rent Control is Unfair to Landlords

It uses government power to stop private citizens, in this case building owners and homeowners, from setting the price of letting someone live on their property. 

Rent control advocates say property owners should not be allowed to set the price – the government should do that.  They want to feel good about themselves because they think they are helping people in need.  This is called third-payer generosity, using the law to make someone else bear the cost of helping others, without incurring any inconvenience yourself.

But many building owners already offer below-market rent to long-term tenants, or provide a temporary break to families struggling through a tough period.  Every landlord knows it’s smart to keep a good tenant and that it’s short-sighted to charge more and then get hit with increased vacancies.  The key to these arrangements is they are voluntary, based on a human understanding between tenant and landlord.

Activists want government to stop voluntary agreements made between consenting parties, by getting city council members, the mayor or city bureaucrats, to dictate terms.  The result is to reduce the housing supply, as property owners learn that selling, or not advertising rental housing in the first place, makes more sense than offering apartments and homes for rent. 

Rent Control Hurts the Public Interest

Finally, rent control hurts the public interest by introducing government-imposed distortions in the overall housing market.  The power of markets is they provide a constant, unbiased and detailed stream of information about prices and supply to buyers and sellers.  People can then make smart, voluntary decisions that work best for them. Government price controls deny people access to accurate information, which in turn produces disruptions that hurt the community.

Cities like New York and San Francisco that have struggled with rent control laws for decades inevitably end up with statutes riddled with exceptions, carve-outs and special deals.  In some cities, rent controlled buildings are notorious for being run down and in poor repair. And why not?  When a property can’t generate enough revenue for upkeep, the owner has no choice but to cut back on maintenance.  No building owner wants to see a once-proud building fall into slow decay, but the larger concern is how it affects the quality of the surrounding community.

Imagine a law that regulated yard sale prices.  Every weekend, well-meaning city officials would tour local neighborhoods placing approved stickers on items people put out for sale, just to make sure no one has paid “too much” for that Elvis souvenir plate or pair of gently-used bowling shoes.

People would fight the idea, not only because it’s ridiculous and impractical, but because it is so obviously unfair.  It is simply not right for government to take the value of something you want to sell by setting a lower price.  It violates property rights, sure, but importantly, it insults people’s dignity.

Most of us are grown up enough to know how much something we want to sell or rent is worth, and to know how much someone else is willing to pay for it, and people in government should respect that. 

Paul Guppy is Vice President for Research at the Washington Policy Center. Washington Policy Center is an independent, non-profit research and educational organization dedicated to providing clear and accurate information to public officials, the media and engaged citizens about issues of importance to the people of Washington State.  Washington Policy Center believes in free markets, low taxes and limited government that provides effective basic services to the community.  For more information, visit Reprinted with permission of Update.