Does Rent Control Redistribute from Poorer to Richer?
Rent control policies are gaining momentum on the campaign trail and in state houses. New research, though, confirms something economists have argued for a long time: rent control has serious adverse effects that undermine its rationale..
The study
examines the effects of a rent control ballot measure passed in Saint Paul, Minnesota, in November 2021, on property values. … [Researchers found that t]he law decreased rental property values by reducing expected future rental income and landlords’ incentives to invest in maintenance.
In addition,
the effects of Saint Paul’s rent control law varied significantly by the income levels of renters, landlords, and owner-occupants. On average, rent control generated financial gains for renters and losses for owners, as expected. However, higher-income renters gained more than lower-income renters. … [Also,] lower-income landlords lost more wealth relative to their income than higher-income landlords. Finally, owner-occupants, despite not directly participating in the rental market, bore the greatest share of the total losses.
The study
shows that the benefits of Saint Paul’s rent control law are distributed regressively to renters, while the costs are distributed regressively to landlords.
In 1921, Argentina’s per capita GDP stood at roughly two-thirds of the United States’. That year, facing a postwar housing shortage, Congress froze rents nationwide at their January 1920 levels; the following year, in Ercolano v. Lanteri de Renshaw, the Supreme Court upheld the freeze as a valid, if temporary, exercise of the state’s police power. The law was written to expire in two years. It did not: rent control, reinvented under one emergency after another, remained a fixture of Argentine law until it was finally repealed by decree in December 2023. Argentina’s GDP per capita today is roughly one-sixth of the United States’. A century holds too many wars, defaults, and coups to blame on a single statute, but the doctrine at the heart of Ercolano — that “temporary” and “emergency” suffice to suspend a constitutional guarantee — is precisely the kind of exception that, once accepted, never runs out of emergencies to justify itself. I discuss this more extensively here:
https://newcriterion.com/article/separated-at-ercolano/