Monday, August 25, 2008
The Greatness of Rent Control
Charles Rangel rents 4 apartments in New York. All them are cheaper than they would normally go for due to New York's radical rent-control laws. Charles Rangel is not poor - he's one of the most powerful congressmen in Washington.
4 apartments. That means there are 4 less spaces to rent for families or other renters because Congressman Rangel can rent them for cheaper.
Check out the NY Times article here.
This is not an isolated incident. Thomas Sowell, in Basic Economics, explains the simple supply-and demand result of rent control. Congressman Rangel exemplifies it perfectly - when one can get something at a cheaper price (and in this case, less than what it's actually worth), they tend to get more of it.
This hapens over and over. Stockholm, Sweden, experienced a massive back log of renters when when rent control was implemented. Why? Because young single people who otherwise would've stayed at home could now afford to rent more and bigger apartements. That meant that families who need more space and are willing to pay more have to sit on a waiting list to get into an apartment.
Not only does demand increase at the lower price, but the supply goes down, since fewer buildiers and private owners are willing to buy a building with a high mortgage, only to be stuck with fixed rental rates. Sowell provides a stat that says there are many more vacant buildings in New York city than there are homeless people.
Getting rid of rent control laws would mean that fat cats like Congressman Rangel no longer get a free ride. It also means the supply-demand equation can now work itself out, as more rental units become available on the market. More selection, better prices, which helps the lower income renters.
Just let people buy and sell how they like. Otherwise, we'll keep subsidizing the rich, like Congressman Rangel.