Rent control creates a clear disincentive for housing providers to provide more housing thereby decreasing supply. What happens to the price of a good or service when supply goes down and demand remains the same? It goes up. Tenants who plan to live in their current apartment until they die are the only beneficiaries of rent control while everyone else absorbs the economic efficiency highlighted by the purple shaded area.
These statements should not be controversial. Economists from the left
and right
broadly agree that rent control is a failed policy and it’s time to demand better from our politicians. From the Washington Post article: “‘Rent control has been about as disgraced as any economic policy in the tool kit. The idea we’d be reviving and expanding it will ultimately make our housing supply problems worse, not better,’ said Jason Furman, who served as a top economist in the Obama administration and is now a professor at Harvard.”
Not convinced? Listen to Freakonomics Radio’s podcast on the topic: Why Rent Control Doesn’t Work (Replay) - Freakonomics
