By Dr. Ileana Johnson Paugh ——Bio and Archives--February 22, 2023
American Politics, News | CFP Comments | Reader Friendly | Subscribe | Email Us
Economically speaking, in a free market unencumbered by heavy government control, payments by tenants must be just enough to keep those apartments on the market. If government dictated rent controls force the rental prices down, apartments will start disappearing from the market.
New York has continuously legislated rent controls in its rental housing since World War II to protect consumers from high rents. Basic analysis of supply and demand shows that both groups, renters, and landlords, are actually worse off.
New York has always had abnormally low vacancy rates. Why? The rent control price, below the free-market price causes a shortage of apartments and few relinquish their apartments. The demand is much higher, but the supply is lower.
Under rent control, a black market is created in which bribes are demanded and given to advance one’s name on a wait list or the prospective renter must buy worthless furniture at inflated prices. Prospective renters engage in endless searches to find a rent-controlled apartment, and normal landlord services are generally non-existent.
Why do rent controls in New York persist then?
Economically speaking, a price ceiling (rent control) creates a class of people who benefit from such government regulation. Once established, rent controls cannot be easily eliminated.
Under the pretext of affordable housing, the Biden-Harris administration announced recently, “new actions to protect renters and promote rental affordability.” Most agree that it is a form of national rent control.
The Federal Housing Finance Agency (FHFA) announced it will launch a new public process to examine proposed actions promoting renter protections and limits on egregious rent increases for future investments. The language is vague and it does not define what constitutes “egregious” rent increases.
According to Pew Research, 36% of the 122.8 million households (data obtained from the 2019 Census Bureau estimates) were renters. Certain demographics (young people, minorities, and low-income households) are more likely to rent and thus are affected more by the escalating rental prices which reflect the Biden administration’s inflationary economy.
Landlords are corporations and individuals who own just one or two units or a house. Only one-fifth of rental properties are owned by a for-profit business. One in ten rentals are owned by individuals with one or two properties, according to the 2018 census data.
Although unpopular with the public, landlords must meet their mortgage payments, property taxes, and repair bills when the renter fails to pay their due rent for months, destroys the property, or makes changes to the rented property without permission from the owner.
Pew Research published data on who rents property in the U.S., based on 2018 Census data.
Rental income was $353.7 billion in 2018. Half of individual landlords reported net income in 2018 and half reported losses. Who rents and who owns in the U.S. | Pew Research Center
Biden’s rent control decree is certainly ill-advised as the issues associated with Americans falling behind on rent, evictions, and inflationary prices are the very result of his economic policies which started on day one of his presidency and the many executive orders issued which aimed to destroy the fossil fuel industry to the benefit of the renewable energy industry, the industry promoted by the global warming alarmists.
Support Canada Free Press
Rent control is banned in at least 30 states in the U.S. for obvious reasons - the results of rent control in the past have been an economic disaster except for those paying cheap rent.
Tom Cranmer stated, “In New York City, rent control made many owners of rent-controlled apartments abandon their buildings or burn them down. If you have toured Harlem and the Bronx, you probably saw the devastation. Drug dealers and addicts took the buildings over.” Other landlords chose to turn their apartments into office space, thus exacerbating the shortage of rent-controlled apartments. (Rent Control Laws by State)
The late Swedish professor of economics at Stockholm University, Carl Assar Lindbeck, famously wrote, “Rent control appears to be the most efficient technique presently known to destroy a city – except for bombing!”
Milton Friedman participated in 1945-46 in a San Francisco historic case study of unworkable rent controls. The common criticism among economists has been that rent control/restriction/regulation causes more harm in the economy by “perpetuating shortages, encouraging immobility, swamping consumer preferences, fostering dilapidation of housing stocks, eroding production incentives, and distorting land-use patterns and the allocation of scarce resources.” Verdict on Rent Control — Institute of Economic Affairs (iea.org.uk)A few years ago, Fairfax County government in Virginia tried to impose rent-controlled slum buildings under the guise of “affordable housing,” to be owned by foolish investors. Residents of single-family homes where these slum buildings would have been inserted, turned out in droves to oppose the plan, and it was quietly dropped.
Landlords in Florida tried to stop rent control initiative in 2022. Landlords try to stop rent control initiative in Florida - Washington Times
Rent controls prompted landlords to turn their rentals into Airbnb and Vrbo short-term home-sharing in the vacation housing market. Untold landlords were lucky and sold their properties before the pandemic hit because were tired of being cheated out of rent by dishonest tenants. With the pandemic moratoriums by the CDC, tenants did not have to pay rent. Some landlords, dependent on rental income for their survival, had not been paid rent in 16 months, and were unable to recover losses as the renters left in the middle of the night, destination unknown, and stealing all appliances. (They didn't pay rent and stole the fridge. Pandemic spawns nightmare tenants)
The White House announced in its recent executive action, among others, the Renters Bill of Rights, the creation of tenant background checks, algorithms, tenant screenings, and applicant’s source of income as a factor into housing decisions.
“But it gets much worse. Biden's minions describe in vague language how the Federal Housing Finance Agency will be looking for new ways to ‘limit egregious rent increases’ on properties backed by Freddie Mac and Fannie Mae. If the mortgage of your rental property ends up in the hands of one of those quasi-government enterprises, you might soon find yourself subjected to a national rent control policy.” If that happens, the rent may not cover the mortgage on the rental property. https://www.washingtonexaminer.com/opinion/editorials/biden-push-for-national-rent-control-will-turn-would-be-landlords-into-airbnb-hosts
Rent control may seem like a good and humanitarian idea to help those who live on a limited income, but, in general, it creates a host of economic problems which harm the population at large. Billions that we send foolishly every year to other countries or trillions that we spend on senseless wars, could be better spent at home to defray the costs of rental for Americans, making a better life for American families, not for the millions of economic migrants who cross our borders illegally every day.
View Comments
Dr. Ileana Johnson Paugh, Ileana Writes is a freelance writer, author, radio commentator, and speaker. Her books, “Echoes of Communism”, “Liberty on Life Support” and “U.N. Agenda 21: Environmental Piracy,” “Communism 2.0: 25 Years Later” are available at Amazon in paperback and Kindle.