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Why the Conventional Wisdom on Rent Control Isn’t All That Wise
It’s gospel among economists that regulating rents is a bad idea. But there’s evidence Tthat the burdens it imposes might be an acceptable price for society to pay.
By Alan Ehrenhalt, Senior Editor, Governing Magazine
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here are three reliable ways to get the about why rent control is a bad idea,” in the words of J.W. average economist mad at you. One Mason, an economics professor at the John Jay College of is to make a derogatory comment Criminal Justice in New York who has devoted much of his about free trade. Another is to extol career to challenging the conventional rent-control wisdom. the benefits of raising the minimum
wage. The third is to say something nice about rent control.
But the anti-rent-control fortress may be showing a few cracks at a time when rent inflation is rampant again in affluent parts of the country. Americans now pay out an average of
The modern anti-rent-control 37 percent of their monthly income on housing. States and crusade goes back to the mid-1940s, cities are looking at serious regulatory experiments. Oregon just after a rent freeze was imposed passed a state law in 2019 that provided for a limit on annual
on New York City apartments to deal with runaway price rent increases for apartments more than 15 years old. The law inflation during World War II. In 1946, renowned economists also imposes tougher standards on eviction and holds that
Milton Friedman and George Stigler of the University of Chicago published a paper they called Roofs or Ceilings: the Current Housing Problem. They argued that controlling rents allowed landlords to neglect their units and resort to devious means to force their tenants out, enabling rent increases. Friedman and Stigler had a reasonable point to make about a rigid New York-style rent ceiling. But it didn’t invalidate the idea of restricting property owners to modest annual increases in times of intense housing inflation.
Nevertheless, the Friedman-Stigler doctrine quickly emerged as gospel among economists and especially among landlords, who saw that it suited their profit-making interests just fine. Eventually, 37 states passed legislation prohibiting any form of rent regulation. A poll in 1990 conducted by the American Economic Review reported that 93 percent of economists thought rent control was a serious mistake. “It’s become almost a textbook cliché: in any intro econ class you learn
renovation of a unit is not an acceptable standard for tenant removal.
Next month, voters in Minneapolis and St. Paul will decide whether to drop rent control restrictions. The referendum in St. Paul is part of a campaign to cap annual increases at 3 percent on most units in the city. In Illinois, a law that would repeal a 27-year-old rent-control ban is under consideration in the Legislature. Altogether, about 200 communities in the United States have some form of rent regulation in place.
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