Pluralistic: Rent control works (16 May 2023)


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A beautifully laid dining room table in a luxury flat. Outside of the windows looms a rotting shanty town with storm-clouds overhead.

Rent control works (permalink)

David Roth memorably described the job of neoliberal economists as finding "new ways to say 'actually, your boss is right.'" Not just your boss: for decades, economists have formed a bulwark against seemingly obvious responses to the most painful parts of our daily lives, from wages to education to health to shelter:

https://popula.com/2023/04/30/yakkin-about-chatgpt-with-david-roth/

How can we solve the student debt crisis? Well, we could cancel student debt and regulate the price of education, either directly or through free state college.

How can we solve America's heath-debt crisis? We could cancel health debt and create Medicare For All.

How can we solve America's homelessness crisis? We could build houses and let homeless people live in them.

How can we solve America's wage-stagnation crisis? We could raise the minimum wage and/or create a federal jobs guarantee.

How can we solve America's workplace abuse crisis? We could allow workers to unionize.

How can we solve America's price-gouging greedflation crisis? With price controls and/or windfall taxes.

How can we solve America's inequality crisis? We could tax billionaires.

How can we solve America's monopoly crisis? We could break up monopolies.

How can we solve America's traffic crisis? We could build public transit.

How can we solve America's carbon crisis? We can regulate carbon emissions.

These answers make sense to everyone except neoliberal economists and people in their thrall. Rather than doing the thing we want, neoliberal economists insist we must unleash "markets" to solve the problems, by "creating incentives." That may sound like a recipe for a small state, but in practice, "creating incentives" often involves building huge bureaucracies to "keep the incentives aligned" (that is, to prevent private firms from ripping off public agencies).

This is how we get "solutions" that fail catastrophically, like:

  • Public Service Loan Forgiveness instead of debt cancellation and free college:

https://studentloansherpa.com/likely-ineligible/

  • The gig economy instead of unions and minimum wages:

https://www.newswise.com/articles/research-reveals-majority-of-gig-economy-workers-are-earning-below-minimum-wage

  • Interest rate hikes instead of price caps and windfall taxes:

https://www.npr.org/2023/05/03/1173371788/the-fed-raises-interest-rates-again-in-what-could-be-its-final-attack-on-inflati

  • Tax breaks for billionaire philanthropists instead of taxing billionaires:

https://memex.craphound.com/2018/11/10/winners-take-all-modern-philanthropy-means-that-giving-some-away-is-more-important-than-how-you-got-it/

  • Subsidizing Uber instead of building mass transit:

https://prospect.org/infrastructure/cities-turn-uber-instead-buses-trains/

  • Fraud-riddled carbon trading instead of emissions limits:

https://pluralistic.net/2022/05/27/voluntary-carbon-market/#trust-me

As infuriating as all of this "actually, your boss is right" nonsense is, the most immediate and continuously frustrating aspect of it is the housing crisis, which has engulfed cities all over the world, to the detriment of nearly everyone.

America led the way on screwing up housing. There were two major New Deal/post-war policies that created broad (but imperfect and racially biased) prosperity in America: housing subsidies and labor unions. Of the two, labor unions were the most broadly inclusive, most available across racial and gender lines, and most engaged with civil rights struggles and other progressive causes.

So America declared war on labor unions and told working people that their only path to intergenerational wealth was to buy a home, wait for it to "appreciate," and sell it on for a profit. This is a disaster. Without unions to provide a countervailing force, every part of American life has worsened, with stagnating wages lagging behind skyrocketing expenses for education, health, retirement, and long-term care. For nearly every homeowner, this means that their "most valuable asset" – the roof over their head – must be liquidated to cover debts. Meanwhile, their kids, burdened with six-figure student debt – will have little or nothing left from the sale of the family home with which to cover a downpayment in a hyperinflated market:

https://pluralistic.net/2021/06/06/the-rents-too-damned-high/

Meanwhile, rent inflation is screaming ahead of other forms of inflation, burdening working people beyond any ability to pay. Giant Wall Street firms have bought up huge swathes of the country's housing stock, transforming it into overpriced, undermaintained slums that you can be evicted from at the drop of a hat:

https://pluralistic.net/2022/02/08/wall-street-landlords/#the-new-slumlords

Transforming housing from a human right to an "asset" was always going to end in a failure to build new housing stock and regulate the rental market. It's reaching a breaking point. "Superstar cities" like New York and San Francisco have long been priced out of the reach of working people, but now they're becoming unattainable for double-income, childless, college-educated adults in their prime working years:

https://www.nytimes.com/interactive/2023/05/15/upshot/migrations-college-super-cities.html

A city that you can't live in is a failure. A system that can't provide decent housing is a failure. The "your boss is right, actually" crowd won: we don't build public housing, we don't regulate rents, and it suuuuuuuuuuuuuuucks.

Maybe we could try doing things instead of "aligning incentives?"

Like, how about rent control.

God, you can already hear them squealing! "Price controls artificially distort well-functioning markets, resulting in a mismatch between supply and demand and the creation of the dreaded deadweight loss triangle!"

Rent control "causes widespread shortages, leaving would-be renters high and dry while screwing landlords (the road to hell, so says the orthodox economist, is paved with good intentions)."

That's been the received wisdom for decades, fed to us by Chicago School economists who are so besotted with their own mathematical models that any mismatch between the models' predictions and the real world is chalked up to errors in the real world, not the models. It's pure economism: "If economists wished to study the horse, they wouldn’t go and look at horses. They’d sit in their studies and say to themselves, ‘What would I do if I were a horse?’"

https://pluralistic.net/2022/10/27/economism/#what-would-i-do-if-i-were-a-horse

But, as Mark Paul writes for The American Prospect, rent control works:

https://prospect.org/infrastructure/housing/2023-05-16-economists-hate-rent-control/

Rent control doesn't constrain housing supply:

https://dornsife.usc.edu/pere/rent-matters

At least some of the time, rent control expands housing supply:

https://onlinelibrary.wiley.com/doi/full/10.1111/j.1467-9906.2007.00334.x

The real risk of rent control is landlords exploiting badly written laws to kick out tenants and convert their units to condos – that's not a problem with rent control, it's a problem with eviction law:

https://web.stanford.edu/~diamondr/DMQ.pdf

Meanwhile, removing rent control doesn't trigger the predicted increases in housing supply:

https://www.sciencedirect.com/science/article/pii/S0094119006000635

Rent control might create winners (tenants) and losers (landlords), but it certainly doesn't make everyone worse off – as the neoliberal doctrine insists it must. Instead, tenants who benefit from rent control have extra money in their pockets to spend on groceries, debt service, vacations, and child-care.

Those happier, more prosperous people, in turn, increase the value of their landlords' properties, by creating happy, prosperous neighborhoods. Rent control means that when people in a neighborhood increase its value, their landlords can't kick them out and rent to richer people, capturing all the value the old tenants created.

What is life like under rent control? It's great. You and your family get to stay put until you're ready to move on, as do your neighbors. Your kids don't have to change schools and find new friends. Old people aren't torn away from communities who care for them:

https://ideas.repec.org/a/uwp/landec/v58y1982i1p109-117.html

In Massachusetts, tenants with rent control pay half the rent that their non-rent-controlled neighbors pay:

https://economics.mit.edu/sites/default/files/publications/housing%20market%202014.pdf

Rent control doesn't just make tenants better off, it makes society better off. Rather than money flowing from a neighborhood to landlords, rent control allows the people in a community to invest it there: opening and patronizing businesses.

Anything that can't go on forever will eventually stop. As the housing crisis worsens, states are finally bringing back rent control. New York has strengthened rent control for the first time in 40 years:

https://www.nytimes.com/2019/06/12/nyregion/rent-regulation-laws-new-york.html

California has a new statewide rent control law:

https://www.nytimes.com/2019/09/11/business/economy/california-rent-control.html

They're battling against anti-rent-control state laws pushed by ALEC, the right-wing architects of model legislation banning action on climate change, broadband access, and abortion:

https://www.nmhc.org/research-insight/analysis-and-guidance/rent-control-laws-by-state/

But rent control has broad, democratic support. Strong majorities of likely voters support rent control:

https://www.bostonglobe.com/2023/03/07/metro/new-statewide-poll-shows-strong-support-rent-control/

And there's a kind of rent control that has near unanimous support: the 30-year fixed mortgage. For the 67% of Americans who live in owner-occupied homes, the existence of the federally-backed (and thus federally subsidized) fixed mortgage means that your monthly shelter costs are fixed for life. What's more, these costs go down the longer you pay them, as mortgage borrowers refinance when interest rates dip.

We have a two-tier system: if you own a home, then the longer you stay put, the cheaper your "rent" gets. If you rent a home, the longer you stay put, the more expensive your home gets over time.

America needs a shit-ton more housing – regular housing for working people. Mr Market doesn't want to build it, no matter how many "incentives" we dangle. Maybe it's time we just did stuff instead of building elaborate Rube Goldberg machines in the hopes of luring the market's animal sentiments into doing it for us.

(Image: ozz13x, Matt Brown, CC BY 2.0; modified)

Hey look at this (permalink)


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Colophon (permalink)

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