Or perhaps we should say as Paul Krugman said back when it was Good Krugman – the economist – writing the columns. For New York State has just significantly strengthened rent control laws in New York City and some suburbs, where they currently apply, and allowed other cities across the state to enact similar measures. The problem with this being that the world’s not a static place – if it were then rent control might have a chance of working. In the sense that it would, over time, reduce the rent that has to be paid, or the portion of income that has to be devoted to paying it.
Our problem – the problem – is that the world isn’t a static place. We do not have a static supply of housing. It is possible for there to be an increase in said supply. Or even a decrease. And this is true of specific segments of the supply too – what were rental units can become not-rental units. What were habitable units can become uninhabitable units. This simple fact that we are in a fluid world means that rent control doesn’t work.
I[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] n passing a sweeping overhaul of rent laws on Friday, New York state lawmakers gave a boost to a movement among state capitals to try to address rental-housing affordability. The New York legislation brings increased power to tenants in roughly one million rent-regulated apartments in New York City. It makes it more difficult for the owners of those apartments to increase rents, while enabling more tenants to sue landlords for rent overcharges. [/perfectpullquote]
The basic problem here is that the population of the United States is rising. This means that more housing units are needed. It’s also true that the populations of certain parts of and places within the US are increasing, meaning that more housing is needed in those places. And there’s a reluctance – in places an adamant refusal – to build in those places where more housing is desired to needed. Such things as zoning land only for single family occupancy, on minimum lot sizes, this sort of thing affects as much as 75% of the land area of Seattle for example.
The way absolutely everywhere else has ever dealt with such a problem is to build apartments going up – denser housing so as to get more people living on the same acre. There is actually no other answer. Manhattan has part of it of course – they are all living in apartments. But rent control still doesn’t work because it militates against people building more such apartments to rent out.[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] The legislation’s reach could also extend much farther in the coming weeks: Localities statewide will be allowed to adopt their own rent regulations, which had previously been limited to New York City and a few suburbs. And other protections, such as limits on security deposits and protections against evictions, would apply to all renters, stabilized or not. “That is a huge reversal of a decades-long trend toward weaker laws and more loopholes and more ability for landlords to make profits,” said Senator Brian Kavanagh, the Democratic chairman of his chamber’s housing committee. [/perfectpullquote]
Which is to be the utmost idiot concerning the matter. Why do people provide rental housing? In order to profit from providing rental housing. Why do people become State Senators for the Democratic Party? In order to profit from becoming State Senators for the Democratic Party. Sure, profit comes in many guises, not just cold hard cash. The ability to pontificate in public is a payment to a certain character type. Being praised for economic ignorance pleases certain people too.
As Paul Krugman has pointed out:[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]The analysis of rent control is among the best-understood issues in all of economics, and — among economists, anyway — one of the least controversial. In 1992 a poll of the American Economic Association found 93 percent of its members agreeing that ”a ceiling on rents reduces the quality and quantity of housing.” Almost every freshman-level textbook contains a case study on rent control, using its known adverse side effects to illustrate the principles of supply and demand. Sky-high rents on uncontrolled apartments, because desperate renters have nowhere to go — and the absence of new apartment construction, despite those high rents, because landlords fear that controls will be extended? Predictable. Bitter relations between tenants and landlords, with an arms race between ever-more ingenious strategies to force tenants out — what yesterday’s article oddly described as ”free-market horror stories” — and constantly proliferating regulations designed to block those strategies? Predictable.[/perfectpullquote]
And as economists just will keep on pointing out. If prices are high then the answer is, if possible, to increase supply. In fact, if matters are left to themselves then high prices will call forth new supply. More supply leading to lower prices of course – those little diagrams at the front of the Econ 101 book are indeed correct.
But what is the mechanism here? High prices mean that suppliers at least have the sniff of being able to make a good profit. Humans are greedy, so good profits lead to people producing in the hope of gaining them. If profits are high, therefore, we get increased competition in supplying that item. Rents are high? So, people should be building more apartments for rent. What happens when we don’t allow people to profit? New supply doesn’t turn up and prices stay where they are.
It’s exactly allowing landlords to profit which will lead to more apartments being constructed for rental. You idiot Senator Kavanagh. And do note it’s not just me saying that, it’s the entire economics profession, more than one Nobel Laureate among them.