All ideas proposed by communists are bad. I don’t think I need to go into too much detail as to why, as they often times are self-evidently awful. But there are those who, if for the slightest of moments, somehow think that some communist proposals are logical and would help people out.
This article is for such people who are not too familiar with the most basic concept of economics – supply and demand – and believe that instituting rent control will help to lower rent and just make everything good and happy.
The Foundation for Economic Education recently talked about this subject as well, and they detail exactly why it is that rent control is a destructive and counterintuitive proposition made by those who fail to understand some of the most basic principles of economics.
Theresa Dolata, a resident of the Windom neighborhood in the city of Minneapolis spoke at a February 23rd city council meeting, urging city leaders to support amendments which would allow the city to regulate rent prices, making the emotional appeal that “I don’t want to end up homeless again, I don’t want to be pushed out.”
Following her testimony, as well as testimonies from other citizens, the council members unanimously approved a charter that would put this issue on a future election ballot so that the residents of Minneapolis could vote on whether or not they wanted rent control in their city.
Council President Lisa Bender said: “The fact that landlords can increase rents with very little notice is impacting people’s lives and their housing stability.”
Let’s assume that what Bender said is true. Landlords increasing rent with little notice impacts people’s lives and housing stability. What ought to be the logical approach when tackling this problem? It’s not the attempt at taking that ability away through rent control regulation, but rather, it’s to look for the root cause(s) of the problem.
There are a number of things which can impact rent prices, from cost of living in the area to taxes (which is part of that cost of living) to land value to inflation, etc. Landlords are, at the end of the day, businessmen and they are looking to make a profit so that they can live comfortably.
Unlike what the Left often portrays them as, they are not wealthy billionaires looking to screw people over.
I remember some time ago watching an episode of Alf where the titular alien was writing some sort of screenplay set during the Great Depression. The play was about a poor family of three, mother, daughter and son, living together in a small apartment, barely making ends meet. The characters in the play are often harassed by their evil landlord who takes advantage of them, asking for their rent early and threatening them to raise their rent, with failure to pay potentially leading them to eviction.
Without going into too much detail about the episode itself, the reason I bring this up is because that caricature of an “evil” landlord is what they claim all landlords generally are: greedy, evil, super wealthy, abusive, etc.
The reality, however, is that most landlords are not super wealthy. They treat their apartment complexes like a small business. Not every landlord is wealthy like Donald Trump or Barbara Corcoran. Not everyone in the real estate business is as wealthy as some of the richest people in the country.
But they get treated as such by the Left, and it’s not difficult to see why. They want to get rid of private land ownership so that the government steps in and builds “everyone” homes that they can live in at “affordable” rates. It’s nothing but a classic communist landgrab.
The landlords often times see that, in order to still make a profit, as all businesses have to do to stay afloat, they have to do certain things, such as increasing rent. They are often uncomfortable with doing it out of fear of leading their tenants to seek another place to leave, but feel as though they have little choice in the matter.
And rent control would only kill their business, leading to basically ALL their tenants to be homeless. If the estate is no longer profitable, no one will invest in it, and tenants would be forced out. That is at least one way in which rent control is destructive and counterintuitive (the stated goal is to keep people like Theresa from being homeless, but that’s exactly what it leads people to be).
Rent control, by the way, has been tried in a number of places from San Francisco to New York, Sweden to Australia, and even the entire state of Oregon passed rent control in 2019. Wherever it’s been tried, it has failed, as is often the case for communism in general.
Supposedly, the purpose for this rent control is to mitigate rising or high rent prices, but it generally doesn’t actually do that.
Berlin tried this, implementing it in February of 2020, and The Economist declares this experiment “a failure.” “Rents may be down, but so is the supply of homes.”
Supply of homes, by the way, is something else that affects rent. Which is why I brought up the simple economic premise of supply and demand. If the supply of homes is low and the demand is high, rent will naturally be high, as there are few other places for people to go to which would offer more competitive rent offers.
Thomas Sowell writes in his book Basic Economics why rent control is a general failure and depicts how it failed in places like Australia, Sweden, New York, San Francisco, etc.
We are asked: “Why wasn’t a single housing unit in Melbourne built in the nine years after World War II…?” With the answer being that “rent control laws had made the buildings unprofitable,” according to FEE.
Washington D.C. saw rental housing stock decline from nearly 200,000 to under 176,000 in the 1970s for the same reason: rent control.
And Santa Monica, California, saw building permits decline by 90% in 1979 from just a few years prior because rent control made the building of new houses unprofitable.
In Sweden in 1948, Sowell writes, there were roughly 2,400 people on waiting lists for housing, but just 12 years later, the waiting list had grown tenfold. In this time, Sweden was building more houses per person than any other country in the world, but rent control made them unprofitable. So even though houses were being built, they were not being rented out, creating an artificial housing shortage.
But when Sweden repealed rent control laws, particularly with all the houses that had already been built, a housing surplus occurred.
Generally speaking, when socialist policies are undone, prosperity is what follows. This was the case for Germany post-World War II and for New Zealand in the mid-80s and 90s.
Rent control is one such socialist policy which is destructive to any economy that tries it and is counterintuitive towards the purpose of instituting such a policy. Sure, rent may no longer go up, but that hardly matters if it leads to landlords no longer being able to afford maintenance of the buildings or keeping the tenants there, leading to even more people to be homeless, if temporarily, which becomes a tad bit more permanent if rent control cripples entire areas.
Rent control is sold as a “solution” to homelessness, but it only creates more of it. A common result of communist policies: they create or exacerbate the very issues they attempt to solve.
“When the righteous increase, the people rejoice, but when the wicked rule, the people groan.”
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