New York has continuously legislated
rent controls in its rental housing since World War II to protect consumers
from high rents. Basic analysis of supply and demand shows that both groups, renters,
and landlords, are actually worse off.
New York has always had abnormally low
vacancy rates. Why? The rent control price, below the free-market price causes
a shortage of apartments and few relinquish their apartments. The demand is
much higher, but the supply is lower.
Under rent control, a black market is
created in which bribes are demanded and given to advance one’s name on a wait
list or the prospective renter must buy worthless furniture at inflated prices.
Prospective renters engage in endless searches to find a rent-controlled
apartment, and normal landlord services are generally non-existent.
Why do rent controls in New York
persist then?
1. People do not understand what problems rent
controls create.
2. Landlords are politically unpopular and
considered evil.
3. Not everyone is hurt by rent controls and
those who benefit fight very hard politically to maintain rent controls; some
pay a fraction of what their apartments would fetch on the free market.
Economically speaking, a price ceiling
(rent control) creates a class of people who benefit from such government
regulation. Once established, rent controls cannot be easily eliminated.
Under the pretext of affordable
housing, the Biden-Harris administration announced recently, “new actions to
protect renters and promote rental affordability.” Most agree that it is a form
of national rent control.
The Federal Housing Finance Agency
(FHFA) announced it will launch a new public process to examine proposed
actions promoting renter protections and limits on egregious rent increases for
future investments. The language is vague and it does not define what
constitutes “egregious” rent increases.
According to Pew Research, 36% of the
122.8 million households (data obtained from the 2019 Census Bureau estimates)
were renters. Certain demographics (young people, minorities, and low-income households)
are more likely to rent and thus are affected more by the escalating rental
prices which reflect the Biden administration’s inflationary economy.
Landlords are corporations and
individuals who own just one or two units or a house. Only one-fifth of rental
properties are owned by a for-profit business. One in ten rentals are owned by
individuals with one or two properties, according to the 2018 census data.
Although unpopular with the public, landlords
must meet their mortgage payments, property taxes, and repair bills when the
renter fails to pay their due rent for months, destroys the property, or makes
changes to the rented property without permission from the owner.
Pew Research published data on who
rents property in the U.S., based on 2018 Census data.
-
58% of black
households
-
52% Hispanic
households
-
27.9% Caucasians
households
-
40% Asian
households
Rental income was $353.7 billion in
2018. Half of individual landlords reported net income in 2018 and half
reported losses. Who
rents and who owns in the U.S. | Pew Research Center
Biden’s rent control decree is certainly
ill-advised as the issues associated with Americans falling behind on rent,
evictions, and inflationary prices are the very result of his economic policies
which started on day one of his presidency and the many executive orders issued
which aimed to destroy the fossil fuel industry to the benefit of the renewable
energy industry, the industry promoted by the global warming alarmists.
Rent control is banned in at least 30
states in the U.S. for obvious reasons - the results of rent control in the
past have been an economic disaster except for those paying cheap rent.
Tom Cranmer stated, “In New York City,
rent control made many owners of rent-controlled apartments abandon their
buildings or burn them down. If you have toured Harlem and the Bronx, you
probably saw the devastation. Drug dealers and addicts took the buildings over.”
Other landlords chose to turn their apartments into office space, thus exacerbating
the shortage of rent-controlled apartments. https://ipropertymanagement.com/laws/rent-control
The late Swedish professor of economics
at Stockholm University, Carl Assar Lindbeck, famously wrote, “Rent control
appears to be the most efficient technique presently known to destroy a city –
except for bombing!”
Milton Friedman participated in 1945-46 in a San Francisco historic
case study of unworkable rent controls. The common criticism among economists
has been that rent control/restriction/regulation causes more harm in the
economy by “perpetuating shortages, encouraging immobility, swamping consumer
preferences, fostering dilapidation of housing stocks, eroding production
incentives, and distorting land-use patterns and the allocation of scarce
resources.”
Verdict
on Rent Control — Institute of Economic Affairs (iea.org.uk)
A few years ago, Fairfax County government in Virginia tried to impose rent-controlled slum buildings under the guise of “affordable housing,” to be owned by foolish investors. Residents of single-family homes where these slum buildings would have been inserted, turned out in droves to oppose the plan, and it was quietly dropped.
Landlords in Florida tried to stop rent control initiative in 2022. Landlords try to stop rent control initiative in Florida - Washington Times
Rent controls prompted landlords to turn their rentals into
Airbnb and Vrbo short-term home-sharing in the vacation housing market. Untold landlords
were lucky and sold their properties before the pandemic hit because were tired
of being cheated out of rent by dishonest tenants.
With the pandemic moratoriums by the CDC, tenants did not have to pay rent. Some landlords, dependent on rental income for their survival, had not been paid rent in 16 months, and were unable to recover losses as the renters left in the middle of the night, destination unknown, and stealing all appliances. https://www.npr.org/2021/10/22/1046154251/they-refused-to-pay-rent-and-stole-the-fridge-landlords-deal-with-pandemic-squat
The White House announced in its recent executive action, among others, the Renters Bill of Rights, the creation of tenant background checks, algorithms, tenant screenings, and applicant’s source of income as a factor into housing decisions.
“But it gets much worse. Biden's minions describe in vague language how the Federal Housing Finance Agency will be looking for new ways to ‘limit egregious rent increases’ on properties backed by Freddie Mac and Fannie Mae. If the mortgage of your rental property ends up in the hands of one of those quasi-government enterprises, you might soon find yourself subjected to a national rent control policy.” If that happens, the rent may not cover the mortgage on the rental property. https://www.washingtonexaminer.com/opinion/editorials/biden-push-for-national-rent-control-will-turn-would-be-landlords-into-airbnb-hosts
Rent control may seem like a good and humanitarian idea to help those who live on a limited income, but, in general, it creates a host of economic problems which harm the population at large. Billions that we send foolishly every year to other countries or trillions that we spend on senseless wars, could be better spent at home to defray the costs of rental for Americans, making a better life for American families, not for the millions of economic migrants who cross our borders illegally every day.
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