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Is There a Dumber Housing Policy Than Rent Control?

Economists working on rent control are forced to adopt an attitude of weary resignation. The studies on it are so universally negative, the lamentable results so consistent, that reiterating them can feel both necessary and tiresome.

Yet rent control endures. The presidential campaigns of Joe Biden and then Kamala Harris both advocated it, and now Zohran Mamdani has made freezing rents a centerpiece of his New York City mayoral campaign. Rent control remains the great rejoinder to all of those who cherish the belief that evidence and experience can sway policy. The question is why rent control remains so popular despite its profoundly negative effects. The reason lies in the strange aspects of housing that make it different from every other good in America.

Some argue that low prices are always popular, but even radical politicians in America don’t advocate for price controls on sofas or cars. Mamdani bemoaned high food prices in addition to high rents, but he did not propose price limits on halal cart meals. Politicians treat housing differently.

One reason rent control seems attractive to politicians is that housing is big and immobile. If price controls are imposed on pita, a pita black market can open up or pita manufacturers can ship their wares elsewhere. It’s not easy either to hide a house or ship it to more appealing business climes.

But rental housing is less immobile than many rent-control advocates think. For one, the owner of a house or an apartment does not have to rent it out. During World War II, the American homeownership rate rose a shocking 10 percentage points, accounting for about half of the increase in homeownership in the entire twentieth century. According to one research paper, a major explanation of that shift is that rent control during the war forced landlords to transfer their units to buyers. Similarly, when San Francisco expanded rent control to some small houses and multifamily units in 1994, researchers found a 25-point reduction in renters living in them. Time and again, the reduction in the number of apartments made rents in the nonregulated units go up.

Another reason rent control seems attractive is that, unlike bread or many other consumer goods, housing is long-lasting. When governments impose rent controls, the buildings themselves will remain in place for years, and most renters don’t have to go back to builders to buy more.

Some argue that low prices are always popular, but even radical politicians in America don’t advocate for price controls on sofas or cars.

Yet one of the most consistent findings of the literature is that buildings under rent control stop getting maintained and fall into decay. Many researchers trot out the late Swedish economist Assar Lindbeck’s famous line that “rent control appears to be the most efficient technique presently known to destroy a city—except for bombing.”

In 1989, Vietnam’s former foreign minister, Nguyen Co Thach, noted the effects of rent control on his capital city: “The Americans couldn’t destroy Hanoi, but we have destroyed our city by very low rents. We realized it was stupid.” One 1981 book had a series of photos of devastated urban wastelands with the captions “Bomb Damage or Rent Control?” Most readers couldn’t tell which was which. Even today, it’s hard to tell the images of the Bronx, particularly hard-hit from New York’s 1970s tightening of rent control laws, from those of postwar Germany and Japan.

Rent control is also attractive because new construction is just a small part of total housing stock, and it responds slowly to ill-conceived policy changes such as rent control. Each year, new construction adds only about 1 percent to the existing housing stock. By contrast, every year the whole stock of chicken wings turns over many times. If price controls made it unattractive for companies to make chicken wings, they would just stop. The supply goes to zero, and every sports bar screams bloody murder. If rent control stops new housing, 99 percent of the product appears to still be there. Since new apartments can take a long time to permit and build, even those minor reductions often take years to manifest.

Yet sometimes people notice when new construction stops. In 2022, St. Paul, Minnesota, enacted a widespread rent-control ordinance. Just two years later, housing production had dropped by over 80 percent, and the city council was forced to roll back some of the previous controls.

One of the most consistent findings of the literature is that buildings under rent control stop getting maintained and fall into decay.

Even beyond the effects on new construction, new apartment listings rarely come on the market under rent control, because old tenants benefit from staying put, often leaving only when they go to their final reward. In New York City, about a fourth of all rent-controlled tenants have been living there for more than two decades, more than triple the rate of market units.

Housing’s immobility, its durability, and its slowness to change all explain why rent control is so appealing to the populace and politicians. But the final reason for rent control’s appeal is that all of those factors make other, short-term solutions to high rents impossible. High housing costs have become one of the most frequent concerns in national polls. Yet the slowness of housing to respond to policy makes politicians reluctant to engage in the one thing that really works: increasing the housing supply. If the public identifies a problem and economists tell politicians there is no easy solution, the politicians will find one nevertheless. In the short term, there is almost nothing for politicians to do to reduce housing costs besides impose destructive price controls. Thus they come.