Date Written: 11/10/2022
Assignment: Pick any chapter in How to Argue, and write 250 words on this: “How could voluntary arrangements solve this problem if the state did not impose the politics of plunder?”
Many people think that government should impose rent controls so tenants can’t be exploited by landlords. However, government rent control is only a different form of price controls and it has the same negative effects of all price controls.
One immediate consequence of rent controls is it can worsen a housing shortage. In the event of a housing shortage, if rents are allowed to rise to the free-market level, then individual tenants will economize by taking up less space. This allows other people to get a share of the space. It also encourages the construction of new housing; when rental profits are high more businessmen will want to get in on it, so they build more housing. This alleviates the shortage and as a result, rents will naturally go back down and everyone will be able to have more space once again.
On the other hand, when governments impose rent controls it encourages wasteful use of space. It discriminates in favor of the current tenants at the expense of everyone who might want a place to rent. Existing tenants aren’t encouraged to economize so they use more space than necessary. Therefore, there is nowhere for other people to stay so they remain out on the streets. It also hurts the landlords who are getting minimal profits from their apartments. The low profits also discourage other businessmen from building more rental homes.
The Long-Term Consequences
There are also some long-term consequences of rent controls. It discourages the construction of new housing in the long term. Rent controls decrease the profitability of the industry. When the profits are low there is no incentive for people to build more rental housing, so they don’t.
Sometimes the government will recognize this and remove the rent controls from new buildings. This still doesn’t encourage the building of new housing. Most of the landlords that own existing housing don’t have the capital to build new housing because the rent controls have given them tiny profits or even losses. Also many people will be afraid that the government will impose more rent controls, so they don’t build housing.
Not only do rent controls discourage housing construction but they also hurt tenants. Depending on how long the rent controls went on, the prices in the new buildings could be 20 times greater than the prices in the old buildings. This makes it so the tenants in the old buildings are often unwilling to move into new buildings. There is also no incentive for the landlords to keep the old buildings in repair. This is because the rent controls in the old buildings make it unprofitable to maintain them. So the buildings fall into disrepair around the tenants. Meanwhile, if the landlords have any money left they spend it on building new homes.
Government Housing
Once the consequences described above become so obvious that not even the government can ignore it any longer, they’ll blame it on the free-market. However, that notion is incorrect; it is the government’s rent controls that caused the problems. From this false notion the government concludes that they should launch massive government housing programs. Sadly, these housing programs are disasters.
Like most government run operations, the housing programs are run on a deficit. The rental rate is not high enough to make back the money spent on construction and operation. Therefore, the government makes the taxpayers pay the difference. The group in the government housing is being selected for favored treatment. A portion of their rent is being payed for them by the rest of the population. This wealth redistribution is theft. If you would like to learn more about how wealth redistribution is theft click here.
Not only is it immoral but it also impractical. Most of the time these housing projects hurt the neighborhood they’re in. They often draw in people who are willing to do bad things. So the neighborhood falls in value. The housing projects also fall into disrepair because of the tenant’s mannerisms and the governments inability to repair them. Sometimes the situation gets so bad that they have resorted to using explosives to just destroy the housing projects.
In the end, rent controls don’t protect tenants. They eliminate the incentive for landlords to repair existing housing or build new housing. There is no way tenants can say that they want that. Government housing is also terrible. It is immoral and destructive to the community it is in. The best thing to do would be to abolish rent controls before they get too much of a strangle hold on our economy.
If you want to learn more about price controls in general click here.
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