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My View: Supporting rent control is Kotek's folly

FILE PHOTO - Tina KotekOn Sept. 12, Oregon House Speaker Tina Kotek, D-Portland, said she planned to push for an end to Oregon’s ban on rent-control laws, enabling local governments to move ahead with measures of their own.

Kotek said she also wants to ban all rent increases above a “reasonable” percentage and end no-cause evictions.

The problem is, no matter how much liberals embrace the concept, rent control doesn’t work. Any short-term benefits, including the applause of some constituents, are always overshadowed by the long-term problems rent control creates.

• However you phrase it, under rent control, government dictates what private owners are allowed to charge for their private property. Yes, the free market has flaws, but it is far better than having bureaucrats running things.

• Landlords who can’t raise the rent on their property to a market price are more likely to cut back on maintenance and less likely to invest in improvements. Not only will landlords have absolutely no economic incentive to invest more in their properties, they may not even have the funds because of limits on their rental income.

• Rent control distorts the housing market by misallocating rental units to those who are already renting them. Whenever government prevents the charging of prices high enough to clear the market, shortages will occur.

• The imposition of rent control can lead to a “demolition derby” where older controlled rental units are purposely torn down and replaced with higher priced units.

• Rent control does not guarantee low rents because it doesn’t regulate the starting rent for a new tenant. When a tenant in a rent-controlled unit moves out, any savvy  landlord will set the rent in the new lease at the current market rent, which is likely to be much higher.

• In a review of 140 economics studies on rent control in Economics Journal Watch, economists overwhelmingly agreed that, “A ceiling on rents reduces the quantity and quality of housing available.” From the abstract: “I find that the preponderance of the literature points toward the conclusion that rent control introduces inefficiencies in housing markets. Moreover, the literature on the whole does not sustain any plausible redemption in terms of redistribution.”

• A broad survey of economists by the IGM (Initiative on Global Markets) Forum revealed a similar repudiation of rent control. The forum is a program of the University of Chicago’s Booth School of Business. “Rent control discourages supply of rental units,” said David Autor, associate head of the MIT economics department. “Incumbent renters benefit from capped prices. New renters face reduced rental options.”

• Once rent control is imposed, it is extremely hard to get rid of, even where its futility is eventually recognized. That’s because rent control will have held rents far below the market rate, so removing them is likely to cause immediate and substantial rent increases, something few politicians (and even some rent control critics) will be willing to embrace in the face of a potential public outcry.

As Art Carden put it in “The Unintended Consequences of Rent Control,” “Suppose that you want to destroy a city. Should you bomb it, or would it be sufficient just to impose rent control?”

Bill MacKenzie is a former communications manager for a major high-tech company in Oregon, a business and politics reporter. and committee staff at the U.S. House of Representatives. He blogs on public policy issues at: thinkingoregon.org