Wednesday, January 19, 2005

Washington DC rent control: bad economics

DC's rent control law will expire this year, but will likely be renewed. Washington Post.

The DC City Council's love affair with rent control demonstrates how you don't need the least understanding of economics to become a city council member.

Prices for apartments are determined by supply and demand. Prices can only be lowered by increasing supply. But instead of issuing a lot of building permits allowing more apartments to be built, the City Council passes laws restricting building owners from doing what they want with their property. Rent control laws are not only offensive to property ownership rights, they also scare away developers from building new apartment buildings and in the long run cause rental prices to rise, the opposite effect of its stated purpose.

Also in the blogosphere: at A Constrained Vision, Katie wrote yesterday about how rent control increases prices in the California housing market.

6 comments:

Curtis said...

Increasing Supply is easier said than done though. There is a shortage of available space in the DC Area. Also DC has laws limiting the height of its buildings, so even if you could find space for an apartment building there wouldn't be enough apartments in it to effect rental prices for the dc area.
I don't think price fixing is the answer to the affordable housing problem in DC. But its not as easy as just increasing the supply.

Libertarian Girl said...

Laws restricting building heights can be changed. Many other things can be done to increase development. But the DC Council would rather waste time with rent control.

Aaronlane said...

As I said earlier it's difficult to get economists to agree on anything. Oddly enough this is one thing (nearly) all of us can get behind.

Even that horse's ass Krugman.

Rent controls do in fact drive up the prices on non-controlled housing. They severely limit the supply of new housing and nearly always wind up hurting the people they are indended to help: low income families.

Of course some people get rent controlled housing, and we refer to those folks as "lucky". Lots of other people have to live eight to a room to be able to afford the slim options that are left over. Still others are homeless due to a housing shortage.

Price controls are nearly always deadly to a well functioning market.

Just as rent controls are a price ceiling that creates shortages, minimum wage laws are price floors that create ... ?

David said...

Part of the problem here is the high % of government people who are lawyers by trade. Too often, their first instinct in dealing with any situation is to make a law prohibiting it or requiring it. Cause-and-effect chains, interactions between phenomena, etc are frequently not considered.

photoncourier.blogspot.com

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