Page 71 - AAGLA-APR 2022

Featured Story
How Rent Control Makes Housing Less Affordable
Market-Based Rents Will Increase Housing Supply, Improving Quality, Expanding Choice, and Lowering Costs
CBy Roger Valdez, The Center for Housing Economics Executive Summary
rent control is the assertion that supply of housing has no effect on or relationship with its price; rent control advocates reject the basic economic principle that price is a quantitative measure of supply and demand.2 Instead these advocates view price arbitrarily set by people who develop and manage rental property.3 Rent control is a form of price control that attempts to solve inflation through legislation rather than increases in production.
What is housing inflation?
“Inflation is caused by too much money chasing after too few goods.” This definition is a good and efficient one. But for most people, inflation is simpler still: “Prices that are too high.” When it comes to housing, we could revise the definition to: “Housing inflation is caused by too many people chasing too few units of housing.” When five people want an apartment, and each makes an offer of tenancy, the person who can bid up the monthly rent will eventually “win” that apartment. People with less money will walk away and be forced to try again.
Stiff competition for rental housing between people who need it happens when demand outpaces production. When such a state exists, average prices rise as potential and existing tenants have to compete with each other for a scarce resource, housing. As demand for housing rises, more and more people who earn less money are “priced out.” This is how housing inflation works in growing cities, favoring people who earn more over those who earn less.
OVID-19 related job loss—and the resulting loss of income for many people—has spurred state and local governments bring back an old policy solution: the imposition of eviction bans and rent controls. From a political standpoint, it’s not surprising. Price controls can be both popular and widely
accepted in a crisis. However, what starts as a short-term intervention can become a medium-term expectation— and then a permanent, ossified mandate—with entrenched special-interest constituencies. Now, more than ever, we need to carefully consider how to make housing more affordable.
When people in the United States talk about the crisis in affordable housing, they’re really talking about the price of housing. That is to say, housing is too expensive for people who earn less money. If we want every American to be able to afford a safe and healthy place to live, we need to understand why we haven’t gotten there yet. Barriers to the market for people who need housing — and high production costs that restrict supply— have led to higher housing prices. The evidence is clear: enabling the private sector to produce as much housing in as many places as possible creates both more competition and innovation. That competition and innovation, in turn, improves quality, expands choice, and lowers costs.
In order to relieve housing insecurity for people
with less money, we need to expand the supply
y of housing: more housing of all kinds in all neighborhoods for people of all levels of income.
r The evidence is clear: enabling the private sector
to produce as much housing in as many places s
as possible creates both more competition and d
innovation. That competition and innovation,
in turn, improves quality, expands choice, and
lowers costs.
Introduction
As local governments in growing metropolitan areas increase rules and regulations that limit housing production, housing prices increase.1 Among the responses these local governments
consider is controlling housing prices by y
legislative fiat. Rent control policies promise
consumers frustrated with rising prices an n
end to inflation. Central to this promise of f
d
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