The researchers suggest transfer payments instead of rent control, minimizing negative effects on supply. But Americans, and I'd bet most people around the world, dislike transfer payments. Nobody wants to be "on the dole", and in any event signing up for those payments comes with its own form of social cost and insecurity. Rent control is a silent tax that is relatively optimal from a political-economic perspective (not just an economic one).
The same dynamics are at play with free trade. Academics said dislocation costs of free trade could be ameliorated with transfer payments. But those payments never came, and voters would never accept them as a substitute for lost jobs. And for similar reasons--people don't want to feel forced to move, they want to feel like their pursuing better opportunities. But when a factory shuts down or a landlord effectively evicts you, it's not a choice. And even if it only happens to a small fraction of people, many more feel insecure even if they have no rational reason to feel insecure.
The question isn't whether rent control is good or bad, it's whether and to what extent it's possible to extract in exchange zoning and development concessions that promote supply increases. Unfortunately, the outlook doesn't seem so good. The only other alternative is Federal pressure, which doesn't seem too likely, either, unless it comes in the form of a Supreme Court decision that constrains zoning practices.
Can't you make them stop worrying by building enough housing that they believe the free market will give them affordable rents even without rent control?
This is different from a factory shutdown because there's much less of a natural cap on housing supply than on job supply. You can build four-story apartment buildings basically everywhere, modulo government interference (zoning, permits, etc.), and they'll work, so you can just build enough to pull down the supply/demand intersection to where people want it, that is, in a free market you can just build residential buildings and expect them to turn into housing. You can't just build a physical factory and expect it to turn into jobs.
Rent control is even on the table in cities like Chicago, which relatively speaking has been pro development. But for a state law prohibiting it, Chicago would now have rent control; and it seems likely that exceptions to that prohibition will pass the legislature. That goes to show that time asymmetry is problematic even without the scourge of single-family home NIMBYs.
Regarding the free trade analogy, the alternative I had in mind wasn't building factories, but moving to new locales and finding new jobs. Which is the de facto existing alternative for housing supply-constrained cities, which have been free all along to promote greater densification, but simply incapable of doing so to the extent necessary.
Isn't the American healthcare system a convoluted set of transfer payments?
There's enough articles here on HN that tell me the high prices and subsidies for a privileged few aren't really a solution to healthcare. I hope that kind of industry stays out of accommodation.
In the most popular cities, where housing insecurity sentiments are acute, rent control has the same logic and appeal to voters as anti-price gouging. And just like with anti-price gouging laws, arguments that such measures negatively moderate price signaling (which might induce greater supply) are insufficient to persuade voters to oppose them. (The more persuasive argument concerns opposing government and advocating for property rights, but in cities with large renting populations that argument is a difficult sell, especially if single-family homes are excluded, which is very often the case.)
Housing security is a fundamental, high priority need (see Maslow's hierarchy of needs). When it's threatened, promises of future supply and price improvements are simply insufficient to resolve the felt problem. There's a time asymmetry dilemma to such structural problems, and there's no easy way to solve it. I argue that some rent control laws (at least in certain geographic areas) are as inevitable as some tariffs, at least in the short term, so long as there's a strong democratic process. Remove or weaken the democratic process and you can more easily resolve that particular dilemma (while creating other ones). I might cite as a supplemental source Platos' The Republic.
Economists systematically underestimate the value of security (defense, shelter, food, etc, and pricing stability thereof). Perhaps because it's difficult to accurately measure. We can "price" the value of a human life in the aggregate or in special situations, and we do for various purposes, like various forms of insurance, or civil restitution. But good luck convincing people to make criminal penalties against murder contingent on inability to pay restitution. (That is, legal if you can afford it.) Even with a trillion dollar premium (above and beyond existing restitution formulas--earnings, pain & suffering, etc), few people would vote for that, which means that in some sense the value is infinite.
In this case, the ideal is stable, affordable rent prices. The proposed solution is rent control.
Rent control, from a policy standpoint, does not create affordable rent prices by itself. It needs to be paired with a lot of other policies - supply control, great city planning, landlord incentive adjustments via taxes, fines / punishments, enforcement of it, etc.
So, people espousing rent control as the solution are inaccurate semantically. Rent control is part of the solution, but what's more important is how rent control is paired with other policies.
Rent control is not an independent solution, but (as most policies are) its complementary and needs to fit with the rest of the policy package. For instance, if you had a policy to force housing to double every year (and somehow it actually happened), rent control is not needed because supply would reduce pricing naturally. And in a supply blocked economy, the issue is that demand is high - rent control would do nothing to reduce demand.
If you're going to create a policy that creates stable, affordable rent prices, you'll need to look holistically at the each sub-part of the issue. Saying that we need stable, affordable rent prices is natural - it's a human need, a moralistic ideal, and also great for many people. But it doesn't add much to the conversation, and it makes it difficult to have dialogue with actual proposed solutions over the loud, muddled public debate.
But then, yeah, the real goal is "keep housing prices low, and keep newcomers out," not "rent control."
I see rent control as a fix for a symptom. Answering the question about the ideal living condition for a city and how to grow successful, long lasting sustainable, healthy cities is the real issue. Rent control is a bandage, and the collection of rent adjustment policies is not as elegant as just a strong set of policies to promote healthy cities.
Admittedly this is really, really idealistic, it ignores the fact that we have a lot of cities that need help right now, and it assumes that there is a standardized way to build great cities.
But I see the ignorance of the left-wing base as just as dangerous. The idea that there's a capitalist conspiracy to trick the populace into believing that free markets are better for public welfare, and that price controls like minimum wage and rent control harm the public, is extremely widely accepted.
Left-wing misconceptions about economics are even more consequential than right-wing populist ideas about vaccines. They have the critical mass of support needed to turn into policy in the most economically important housing markets in the US.
1) Does Piketty's "Capital in the Twenty-First Century" advocate a conspiracy? Quoting it Wikipedia entry:
"The book's central thesis is that when the rate of return on capital (r) is greater than the rate of economic growth (g) over the long term, the result is concentration of wealth, and this unequal distribution of wealth causes social and economic instability."
That is, there's no need for a conspiracy to get the results we see, and leftists like me don't need to appeal to conspiracy theories.
2) You mention "believing that free markets are better for public". But what's pushed isn't a "free market" - what's pushed is a lack of constraints on those who control capital. Few who push for a free market also push for loosening constraints on labor.
Taft-Hartley should be seen as offensive to a real free market. So-called "free market" advocates protest minimum wage laws, but omit mentioning that labor power, when not hobbled by restrictive US laws, would be the free market solution.
As an example, the Nordic countries don't have minimum wage laws. Instead, minimum wages for a field are set by collective bargaining, which is possible because of stronger labor unions in those countries.
As you can see, I don't believe that "price controls like minimum wage" are the right solution to that problem.
But to your strawman, Piketty's observation turns out to be entirely explainable by real estate:
https://medium.com/the-ferenstein-wire/a-26-year-old-mit-gra...
2. I wasn't contradicting your assertion at all. I was just claiming that it's a very common belief within left-leaning circles that economists' claims of the social benefits of free markets are propaganda formulated by and pushed for the benefit of a capitalist elite.
This conspiratorial view of the economic science is similar to anti-vaxxer theories about Big Pharma and Big Gov being behind the scientific opions on the efficacy of vaccines.
>>As you can see, I don't believe that "price controls like minimum wage" are the right solution to that problem.
Going back to 1, I wasn't generalizing all left-leaning people. Just as all right-leaning people don't believe in anti-vaxxer theories, not all left-leaning people believe in price controls like rent control and minimum wage.
Also, the anti-vaccine movement seems more leftish than rightish as it seems to correlate with higher incomes and education (paradoxically), and over the past several decades higher income and college educated brackets have strongly shifted Democratic.
Obviously not good education. I see anti vaccine nonsense from both sides, with the common theme being contrarian and not trusting big government or corporations, and thinking highly of themselves because they think they have some insider scoop on what is going on.
To claim that something is great, you should at least address the standard arguments that it's bad!
Rent control disincentivizes renovation of existing apartments and building new ones. It also encourages people to stay in apartments that are too big for them, because rent control typically locks price for existing, long term tenants on lower level than paid by new tenants. All this makes housing crisis worse.
A prospective landlord might have been required to live in their building for a minimum of a year first. That dampener would slowed down the fission reaction. But oh no, regulation is bad. Trickle-down is good.
We've already experienced the result ... tens of thousands of homeless. Who -should- pay?
