Rent control laws could be contributing to shortage of affordable housing

as Housing expense Rent prices have increased sharply in the United States in recent years, and there is a movement across the country calling for rent control measures to stabilize prices. But such laws could make the problem even worse.

Despite warnings from economists, rent controls are becoming increasingly common in progressive strongholds. Oregon led the way when states imposed caps on older units in 2019, and California followed suit in 2020. Since then, municipalities in Illinois, Colorado, Massachusetts and other states have considered similar measures.

Demonstrators march in downtown Chicago in support of lifting Illinois’ rent control ban on March 20, 2021. (Max Herman/NurPhoto via Getty Images/Getty Images)

During the 1970s, when high inflation returned, many states implemented various forms of rent control. However, several governments subsequently banned rent controls because there was a consensus that price controls were a destructive policy. Now, that trend is emerging again.

Ryan Vaughn, director of national economic understanding at the Cato Institute’s Center for Economic Research, said in an interview with FOX Business that imposing rent controls tends to reduce the quantity and quality of affordable housing. Academics said they overwhelmingly agreed and explained why.

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Vaughn said rent tends to be the biggest expense for families at a time when cost of living concerns are a pressing issue. It is therefore natural for politicians to consider ways to make living more affordable for people. But when you consider the underlying economics of rent control, it becomes less simple.

rent sign

A “For Rent” sign in front of a building in Miami Beach, Florida, on December 6, 2022. (Joe Radle/Getty Images/Getty Images)

“If you put a cap on rents when you know there’s a lot of growth in real estate demand, you create a situation where there’s not enough rental housing relative to the demand, and you create a shortage,” Vaughn said. “And to the extent that there is a shortage, underlying market rents could actually go up, because if you keep rents below market rate, a lot of landlords will either convert their properties to condominiums or Because as an owner you decide to sell.”

He added: “In far too many cases, the underlying market value of a property is actually higher, rather than lower.”

Adults and children live with their parents to save money for housing

Bourne said the broader the scope of rent control, the greater the damage, and the policy is more concerning in areas where the law applies across the board.

he gave an example new jersey Rent controls have been in place for a long time, but they don’t really have a big impact because they only apply to certain properties and tend to have fairly high caps.

Protesters march for rent control in Minneapolis

The Minneapolis United for Rent Control Coalition has come together to make 2022 the year of rent control in Minneapolis. (Michael Silk/Universal Images Group via Getty Images/Getty Images)

However, at that time Minneapolis tried. He said the 2021 rent controls were broad in scope and had very strict caps, with “pretty dire consequences”.

Vaughn said that after Minneapolis instituted rent control, the city saw a significant drop in permits to build new apartments, leading officials to believe that the law targeted new construction and would have a dire impact on real estate availability. He said that the law needed to be amended immediately. .

A national inventory shortage is causing rents to rise across the country, especially in major cities. Still, many large cities have enacted, and some are considering, rent control measures, even though the policy could further hurt housing supply and drive up prices overall.


One example is New York City, which has had rent control laws in place for decades and is currently defending its laws before the Supreme Court. According to a recent Moody’s report, New York City has the highest rent-to-income ratio in the United States at 64.9%.

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