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Why Rent Control Hurts Renters | 5 Minute Video

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Nicole Gelinas of the Manhattan Institute shows why price ceilings on apartments hurt those it intends to help — but also why rent control is here to stay. She explains the background of rent control in America (focusing on New York in particular) and the negative effect it has on prospective renters and on the quality of rent-controlled apartments. Did you know that landlords of rent controlled apartments in New York City rarely improve their properties? Watch this video and learn why. Hint: They know that there’s a long line of people ready to move in if their current tenants get fed up. And even though evidence suggests (and economists on the Left and Right agree) that rent control is self-destructive, the voters love it!

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Script:

There’s no hot button issue hotter than rent control. Even the most courageous politican quakes at the idea of opposing it. For starters, no one likes landlords. Second, those who benefit from rent control — and there are a lot of them — vote. And it has huge emotional appeal.

Imagine this six o’clock news story: a reporter interviews a senior citizen describing how she’ll have to vacate her small apartment, her home for twenty five years, if her rent control isn’t maintained. What politician wants to go up against that?

These are just a few of the reasons why, once a city adopts rent control, it’s almost impossible to dislodge it. But does rent control work? Does it lower or raise housing costs? And does it increase the building of more affordable housing? It might surprise you to know that nearly all economists — on the right and the left — from the late Milton Friedman to Paul Krugman agree that the answer is no.

In a survey of 464 economists in the May 1992 issue of American Economic Review, 93% said that “a ceiling on rents reduces the quantity and quality of housing available.” Why the unanimity? Because it’s an accepted economic principle that government imposed price controls — and that’s what rent control is — always leads to price distortions — in this case rents.This applies everywhere, but let’s focus on New York City, the place where I have concentrated my research.

New York has the biggest rental market in the country. Of the city’s 8.2 million residents, 5 and a half million rent. And these five and a half million renters live in about 2.2 million apartments or rented houses.

Every year, a city board votes on how much owners of rent-regulated apartments will be able to charge their tenants for the following year’s one-year or two-year leases. The board members base their decisions not on supply and demand but on an estimate of how much costs such as fuel and insurance have risen. And, of course, how much of an increase voters will tolerate.

Think about what this means: the longer you stay in your apartment the more you benefit from below-market rents. Or to put it another way, why would you ever leave your rent controlled apartment?

For the complete script, visit https://www.prageru.com/videos/why-rent-control-hurts-renters

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Tags la apartmentslandlordlos angeles apartmentsManhattan Institutenew york city apartmentsNicole Gelinasnyc apartmentsprice ceilingrent controlrent regulationrent stabilizationrental apartmentsrentalsrentingslumlordtenant
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41 Comments

  1. What if we put a limit how many housing units a family can buy? Let's say two. With that we end up with many apartment avaliable to be sold at an affordable price, decreasing the number of renters, and increasing the number of owners. The scarcity of cheap apartments is caused because many landlords poses 10, 20+ appartement, and if there aren't newly constructed apartments, the demand for the existing will increase, increasing the price of the apartments and of the rent. A limit must to be put how much anyone can buy from a limited ressources in order everyone to be able to benefit from them.

  2. Correct-ish. The issue cannot be fixed by releasing rental power, we already do that in just about every state. The issue is the vacancies of housing. Limit the total amount of rental houses one person can own to increase the amount of housing ownership, increasing the supply dramatically while allowing these houses to be owned rather than rented. Housing ownership is a necessity, and many of the largest states have more renters than owners, and issue that must be addressed by decreasing rentals and increasing ownership, alongside making filling vacant houses a priority. Lack of control can easily lead to a slow growth of monopoly to make the houses in the area expensive enough that those desperate enough to use it will very much buy it anyway, an issue societally proven over the last 20 years. Increasing ownership creates more permanent residency, which forces them to eventually create more houses once the supply hits a low, creating a more consistent demand and supply for housing.

  5. I consider myself to be a moderate Republican who likes and voted for Donald Trump, and yet in all honesty, this video did not convince me to be against rent control. yes, i understand the arguments against it. however, as somebody who lives in a rent-controlled city who has lived in the same apartment for twenty years now, i have to say that living in it as a rent controlled apartment is enormously beneficial to me. for one thing, i dont have to worry about the owner deciding that he doesnt like me, and then proceeds to suddenly raise my rent so high that it forces me to move…and where would i move, anyway? yes, it is true that they never repair anything. the latest incident is that they refuse to fix my broken garbage disposal. they always find some excuse to not fix things. it may seem unfair that i have to find a way to fix it myself. however, as the above video itself points out, whatever i will be paying the plumber to fix my garbage disposal, is soooooo much less than whatever steep increase in rent that the owner would charge me as a way of pressuring me to move out. so i would rather have the situation as it is. of course, i can imagine somebody like Milton Friedman (a man whom I admire and agree with most of the time, btw) saying, well, yes, it does benefit me, but not all the people who might have benefitted from new apartment buildings that would have been built had there been no rent control. on this i cannot disagree, yet it still remains that i as a renter in a rent-controlled city, am benefitting from it being under rent control

  12. If you have landlords are buying up housing for profit then the housing market gets more expensive so your agreement is well it isn’t profitable ok so make housing for housing not profit and an asset for speculation mass production of affordable housing as well as reallocation of current housing that are owned by landlords will do the trick

  19. It’s funny how the clowns at PragerPoo will listen to 93% of the “economists” about this issue, but will ignore the 97% of actual scientists who say that climate change is not only real, but man made and an existential threat…

  21. Unfortunately we live in a time when new apartments would be priced too high for the lower and even middle class, and homelessness would become disastrously high. There has been 30 years salary stagnation, so the math just wouldn't work.

  25. Easily explained: the longer you can keep renters the more money you get. Government raises minimum wage, rent gets raised and it’s an endless cycle. Just lame economics trying to justify why ceilings are bad in some situations and not others.

  28. St. Paul Just Implemented the Nation’s Strictest Rent Control Law. It’s Already Backfiring Tremendously.
    Yes, some renters save money in the short term by enjoying artificially low rents. But the restricted prices limit future construction and housing supply which ultimately leads to a housing shortage and less affordable housing in the long run.

  33. All the arguments about things that will happen with rent control seem to be happening already. Landlords don't fix and maintain their units anyway, and all new housing built is for the upper class. Convince me otherwise?

  39. Rent in itself hurts citizens. Before around 1900, "rent" was a rarity and was normally for hotels. This is because property was so easy to get. Homesteading, and Land Patents made land almost free. We should go back to this as it is more in-line with the fundamental of Every man is a king. If the Fundamental is to be upheld then no man shall have dominion over another. A Landlord has exactly this power. The very thought that someone can take your home away from you is the source of major and constant stress on the average citizen. Even if your house is "paid off" there are still property taxes and if unpaid, your house can be liened, taken from you, and sold by the government. The laws around land Patents remove the burden of property taxes (unless you are running a business on the property). Imagine never having to worry about your home. Your base of operations. I bet even street crime would take a dive. Before people start freaking out with concern over there not being enough land in the US: How much land in the US is actually occupied full time? 4.2%. We have enough.