by Mike Kimel
Rent Control, Redux
There’s been a small dustup on rent control lately on the blogosphere. Peter Dorman has been pointing out that the theory everyone knows may not fit the facts. I myself covered the topic before here. Its worth a read, I think, but here’s the takeaway
Now, I haven’t been in NYC in decades, but I do know this. After a few decades, there’s time for a market to adjust. If it doesn’t pay to be a landlord, expect fewer people to want to be landlords – the supply of dwellings for rent relative to dwellings for sale will dwindle. If it doesn’t pay to be a renter, expect fewer people to want to be renters – the demand for dwellings for rent relative to dwellings for sale will dwindle. Either way, if rent control “ruined New York City real estate markets” and has been doing so since 1943, one thing we should expect is that the percent of occupied housing units that are owner-occupied (as opposed to renter occupied) in NYC is much higher than in places where the real estate markets were not ruined by rent control.
Following a look at the data:
Put another way, in NYC, where generations of rent control has destroyed the rental market, two thirds of all occupied dwellings are rentals. In the rest of the US, two thirds of all occupied dwellings are not rentals. By the numbers, it seems the rental market is extremely healthy in NYC relative to the rest of the country. And BTW… the bottom three slots of the national ranking of states and the District of Columbia, the three locations with the lowest percentage of owner occupied housing as a percentage of total occupied housing, were taken up by the Washington DC, New York, and California. It just so happens that when I hear people talk about how rent control has destroyed a market, driving out landlords and renters alike, the story is usually about DC, NYC, or San Francisco. Funny, huh?
Two more points… fourth from the bottom of the list, right above California, is Hawaii, while at the other end (i.e., at the top of the list) we find we find Minnesota, West Virginia, Michigan and New Hampshire. Also, if you work your way through the data, you’ll find that big cities like Boston, LA and Houston all tend to have relatively low homeownership rates. I’m guessing anyone whose mouth isn’t automatically programmed to say “rent control” can noodle out for him/herself exactly what is going on here.
The saddest thing about the economics profession today is not the number of economists who believe things that make little sense and who refuse to look at data that is so readily available. The saddest thing, frankly, is that the fairy tales told in the profession make their way out into the real world and affect real decisions.