How Rent Control Destroys Cities

In many cities governments maintain rent control ordinances which date back to the 1960′s or even earlier. These laws make it a crime for a landlord to charge rents higher than they were at the time the law was originally enacted. Most of the regulations have been relaxed somewhat from time to time to adjust for inflation. Despite this, in most cases, the ordinances have held rents to levels far below the free market price for similar housing in the suburbs.

Rent control has changed the cities where it is in effect. In most cases, almost no new rental housing has been constructed in cities after rent control was enacted. Prospective landlords have found something better to do with their money than build housing from which they could not realize what they consider to be a reasonable return.

There have been many secondary effects. In some cases, existing landlords have been unable to maintain the buildings properly with the low rents. Maintenance has gone down, and the buildings have deteriorated. In revenge, the city councils have issued citations to landlords (called “slumlords” by the press) for housing code violations. Some have been carted off to jail for failure to maintain their apartment buildings properly.

In other cases, landlords have abandoned rent controlled buildings altogether as unprofitable. Many city blocks in upper New York City became totally deserted, open to vandals and drug dealers. Still other buildings have been torn down for parking lots, or converted to condominiums, office buildings or stores. In rent controlled cities, homelessness is a much greater problem than it is in other cities.

Where does rent control exist?

Fortunately, rent control exists in only four states: California, NY, NJ, MD and the District of Columbia. All these areas are heavily Democrat controlled areas, and are unlikely ever to change.

In many cities with rent control in effect, the middle class and poorer residents, finding housing possibilities drying up, have left the city to seek housing in the suburbs. One effect has been that such cities are often deserted after dark. Some observers have described the effect of rent control as being as devastating as a nuclear bomb. In reality, it is more like the effect of the plague: the people are gone but many of the buildings are still standing.

Many city councils have realized that rent control has harmed their cities, but are powerless to do anything about it. The main reason is that inflation, reduced supply of apartments, and increased population has pushed the free market price of housing much higher than the frozen rent rates. If the city council were to remove the rent controls, the prices would go through the roof — and the tenants would rise up in revolt and kick out the politicians who removed the controls.  In such cases, no one dares tackle the problem, and the cities slowly die.  Without a middle class to pay the taxes, these cities get deeper and deeper into debt, and unable to pay for their public services.

About Arthur Middleton Hughes

Arthur is currently Vice President of The Database Marketing Institute based in Fort Lauderdale, FL. Arthur is the author of 11 books, the latest of which is Strategic Database Marketing 4th Edition (McGraw-Hill 2012). A BA graduate of Princeton with an MPA in Economics and Public Affairs, Arthur taught economics at he University of Maryland for 32 years. He is an Austrian Economist.
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