It’s clear why President Joe Biden desperately wants to bring down housing prices and rent. With mortgage interest rates double what they were when former President Donald Trump took office, mortgage payments have roughly doubled since 2020, and rents are up in many cities by more than 30%.
So much for the dream of homeownership. And just finding an affordable rental unit larger than a dorm room is getting harder all the time.
Biden blames “greed-flation” for the high rental costs. He’s now proposed a two-pronged plan to combat rising rents. First, he wants to reinstate rent controls in major metro areas and impose financial punishments on landlords if they raise rents by more than 5% a year. And second, he wants to make it illegal for landlords to use computer algorithms for setting prices.
Rent control has been going on for nearly 100 years in major cities, and it was started in New York decades ago when demand for apartments was outstripping supply. Rents came down for those lucky few who grandfathered into sweet deals on rent-controlled apartments, but for everyone else, housing costs got MORE expensive.
Even many liberal voices in cities that followed suit soon admitted the errors of their way. Study after study from conservative to liberal groups found that the policies backfired. Rent control led to a deterioration in the quality of housing, less amenities and fewer appliances, and far fewer new units coming on line. All of these reactions hurt renters and made housing conditions worse.
A major impact was that the supply of available apartments fell, and homelessness went up when families couldn’t find affordable units. With controls on the profits that landlords could earn, new construction of apartment buildings nearly shut down in the areas where the rents were regulated.
For these reasons, starting in the 1980s many cities began to acknowledge the policy failure, and price controls were relaxed or abandoned. But bad ideas never completely die. (Vice President Kamala Harris wants to bring back unpopular mandatory school busing of kids outside their local district.)
Even Democrat economists are now warning that Biden’s rent control will only discourage new housing developments, which — next to tackling general price inflation — is the single most effective way to address housing prices.
Jason Furman, chair of the Council of Economic Advisers under former President Barack Obama, said that “rent control has been about as disgraced as any economic policy in the tool kit. The idea we’d be reviving and expanding it will ultimately make our housing supply problems worse, not better.”
He’s right. When Cambridge, Massachusetts, got rid of its rent controls in the 1990s, it saw an influx of property improvements. San Francisco, on the other hand, increased its rent caps and quickly saw a 15% reduction in supply, which actually increased rent by 5%.
Price controls cause shortages. This is an iron law of economics.
Equally foolish is the Biden idea — supported by a handful of radical Democrats in Congress — to ban pricing software that allows landlords to set rents based on changes in supply and demand. This is called “dynamic pricing,” and it’s been going on for 100 years or more. Rents adjust (up and down) to the change in the number of people looking for units. Computer software allows firms to do this more efficiently.
The government uses dynamic pricing for Amtrak and tolls based on customer demand. Why shouldn’t landlords?
Computer algorithms can actually drive housing costs down as well as up, especially in situations where fewer people are looking to rent in an area. This is hardly price-gouging.
If Biden wants lower housing costs, he should examine his own policies of spending and borrowing trillions of dollars, which have reduced real take-home pay and driven up the cost of building new houses and apartments. His green policies have also driven up these costs in cities.
Blaming landlords, computer programs and “corporate greed” for higher prices is like blaming umbrellas for the rain.
Stephen Moore is a visiting fellow at the Heritage Foundation and a senior economic advisor to Donald Trump. His latest book is: “Govzilla: How the Relentless Growth of Government Is Devouring Our Economy.”
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Rent control, wherever it has been implemented, has virtually assured NO additional apartment buildings were every constructed in the cities the Democrats claim to care so much about so-called affordable housing. Rental property construction in most cities with rent control quickly gave way to condo and co-op units, as the economic fundamentals of owning and operating rental buildings became huge financial sink holes. When the cost of property taxes, heating, air conditioning, assorted city fees and regular property maintenance upkeep costs rise on a minimum of an annualized basis of at least 7 to 10 percent and your income stream (meaning rents collected) are capped at 1 to 3 percent per annum, it doesn’t take long for an apartment building to go cash negative real fast. Such buildings also become unsaleable on the open market, because no one is going to want to buy an asset that constantly runs cash negative with ever mounting expenses.
The Democrats nearly created a second Great Depression via the Community Reinvestment Act that was weaponized by Bill Clinton in the 1990’s and finally detonated in 2008 from all the federal government mandates to the banks to issue millions upon millions of mortgage loans to people with lousy credit ratings and no means to actually ever pay those loans back. We only avoided that fate through the coordinated intervention of the Federal Reserve to buy up most of the trillions of dollars of worthless paper, while the U.S. Treasury flooded the economy with excess dollars to keep the economy from completely buckling.
Now the Democrats (this is NOT just coming from Biden by any means, as everything in his administration says or does is driven by those pulling his strings) are back with another attempt to crash the real estate market in this country via this ludicrous national rent control idea. They really want to nationalize everything they can find a way to sink their hooks into one way or another. Standard Marxism.
Their goal is easily enough to see. The idea is to crash the rental housing sector, so people like BlackStone, BlackRock, Fidelity and others can scoop up thousands upon thousands of existing apartment buildings across the country dirt cheap, with the aid of cheap federal money. In effect what you end up with is nationalizing the rental housing market under the guise of saving the housing sector from another man-made crash due to bad Democrat policies. The big players end up making 10’s of billions more a year. The entire national rental sector becomes de-facto government-controlled housing for the masses, with no affordable alternative options, and any and all future construction in the rental housing space will only be done through connected players who are deep-pocketed donors to the Democrat Party. The Democrat politicians get their cut via an increased stream of campaign donations in exchange for access to being part of the favored few getting even wealthier off this scheme. Like I said, the goal is easy enough to see. Other third world banana republics have implemented schemes quite similar to this one. So the Democrats get no points for originality. They’re just copying stuff out of the same old reliable socialist / Marxist playbook and trying to sell it to a gullible and uniformed public as “helping the little guy”.
word of advice for anyone thinking of being a landlord: DON’T! Between horror stories about tenants from hell and government making it impossible for landlords to earn any money off their rental units, it’s not worth the aggravation.
When you allow 10 million people into the country of course there’s going to be a shortage of housing!
It is not the governments job to decide about rent. that is the property owners job.
Are not those computer programs the same as what the local government uses to compute property taxes? Evil on on side, saintly on the other. How dumb do they think we are?
Did you ever notice that politicians never mention WAGE CONTROL for themselves?
This administration has become involved in so many unconstitutional issues, issues that the federal government has no authority to get involved with, it must have set a record. Perhaps someone from this incredibly corrupt, criminal, treasonous administration could show us all exactly where in the Constitution the government is given authority to impose price controls on ANYTHING. I will wait…
rent control is part oc Marxist/Communist plan
Any time the government gets involved in anything the costs go up. In education (basic ed and higher ed), healthcare ( doctor, hospital, pharmaceutical), housing, any kind of insurance. I have seen it over the last 50 years.
Covid gave the government (or the government took) the chance to “pause” rents.
That was price control. The position that put landlords in still reverberates. Price control will reduce units available and drive up price (as long as there is any freedom).
Cap my rental income, and i stop putting money in the building. Government-caused slums and more homelessness. Simple as that.
“Rents are up more than 30%”.Are you kidding? When my wife and I moved to Buckeye AZ,our rent was $700 per month in 2014,it is now $1400 per month.Thats 100%.At 80 years of age(I’m now 84)I had to go back to work in order to make ends meet.Luckily I’m still fit and use the gym 3 or 4 times a week.Biden and Harris were responsible for this situation with their so called economic policies.
I just read an article where an economist said “the easiest way to destroy a housing market is thru rent control. Second only to bombing”
Announce rent control, and watch the rents get jacked up in a hurry to beat the date they go into effect.
Any time that there is the government hand in anything, especially we suffer the consequences.
And now ubrellas cause rain. ??? LOL Kyle L.