Amity Shlaes reminds us of a classic little 1946 essay by Milton Friedman and George Stigler on rent control, “Roofs or Ceilings: The Current Housing Problem.” Rent control was pervasive at the time, and it’s nice to remember how much people thought it was necessary, and how revolutionary Friedman and Stigler were.
In 1991 when I was in team debate in high school, the topic of the year was how to solve the homelessness problem. My partner (now an antitrust attorney) and I proposed a simple solution: End rent control. We did well with the plan making it to the CA state tournament and barely missing nationals. I remember using the Friedman quotes in our case and many others from writers in Reason magazine. I never would have thought as a junior in high school that this topic would have such relevance over 30 years later.
Having lived in the Bay Area and SoCal for a long time, I can tell you I never ceased to be amazed by the straight-faced insanity of those reiterating the call for more controls in the housing market. It hasn't worked. It will never work. Yet, all of these proponents seem to think that prior experiences merely reflect that controls weren't "implemented correctly". Surely, this time (with them in charge), it will be a different outcome. Alas, no.
Basically for rent control to be successful, not only do the laws of economics need to fail but the same for the common adage of "learn from history or be doomed to repeat it".
As Ayn Rand said somewhere: “There are no contradictions in nature. If you see a contradiction, check your premises.”
Am I correct, You presume that the goal of rent control advocates is to solve the problem? What if they maximize their own benefit(s)? What could those benefits be?
1. There are politicians who see this as a winning electoral strategy. I don't think they care about the actual outcome so much as being able to use it as an issue in the next campaign.
2. Renters who already have leases want to serve their own self interest.
3. There may be landlords adjacent to rent control but not rent controlled themselves. They know rent control will drive up the rents they can charge.
The Baptists:
1. There are do-gooders who only see the seen. They go to bed at night sure they helped. Bless their hearts.
John's clear eyed assessment of structural economics is always good to read. I would gladly take in any of my neighbors needing temporary housing after the 2026 earthquake (we have 2 extra bedrooms) but I'm not interested in renting them out permanently and certainly not to the population at large. Fewer people and a less entitlement-minded society in 1906 was a different situation.
You missed the obvious solution. All those tents in place on campuses in Berkeley, Palo Alto, etc. can be repurposed into permanent housing when the protestors move on to the next cause. Two birds, one stone, problem solved! This is California after all, and we certainly can't expect a response based on any rational thought process or real-world application.
Who would rent a room out in California, especially in Los Angeles or San Francisco, where the renter suddenly takes on more rights than those of the homeowner, who may not be able to terminate the agreement without an eviction proceeding -- expensive, and stacked in the tenant's favor?
The unfortunate reality is that the public is OK with this. Oregon adopted statewide rent control via referendum, and St. Paul recently adopted it as well.
I was on my NJ town's rent control board for two years in the 90s. I was appointed by the mayor, even though I made full disclosure to him that I was an opponent of rent control. On the other hand, the ordinance covered hardly any units in the town, and during my tenure we didn't have a single case come before us. That rendered my objection to the ordinance moot, since it required that any rent increases be no more than half the increase in the midpoint of the CPI for New York and Philadelphia.
What gets me is that even other economists didn't listen to Milton Friedman and George Stigler. The two of them were accused of shilling for landlords even though everything they wrote in their article was public knowledge and their arguments would have been familiar to Adam Smith.
In 1991 when I was in team debate in high school, the topic of the year was how to solve the homelessness problem. My partner (now an antitrust attorney) and I proposed a simple solution: End rent control. We did well with the plan making it to the CA state tournament and barely missing nationals. I remember using the Friedman quotes in our case and many others from writers in Reason magazine. I never would have thought as a junior in high school that this topic would have such relevance over 30 years later.
Having lived in the Bay Area and SoCal for a long time, I can tell you I never ceased to be amazed by the straight-faced insanity of those reiterating the call for more controls in the housing market. It hasn't worked. It will never work. Yet, all of these proponents seem to think that prior experiences merely reflect that controls weren't "implemented correctly". Surely, this time (with them in charge), it will be a different outcome. Alas, no.
Basically for rent control to be successful, not only do the laws of economics need to fail but the same for the common adage of "learn from history or be doomed to repeat it".
As Ayn Rand said somewhere: “There are no contradictions in nature. If you see a contradiction, check your premises.”
Am I correct, You presume that the goal of rent control advocates is to solve the problem? What if they maximize their own benefit(s)? What could those benefits be?
Let's see, the bootleggers:
1. There are politicians who see this as a winning electoral strategy. I don't think they care about the actual outcome so much as being able to use it as an issue in the next campaign.
2. Renters who already have leases want to serve their own self interest.
3. There may be landlords adjacent to rent control but not rent controlled themselves. They know rent control will drive up the rents they can charge.
The Baptists:
1. There are do-gooders who only see the seen. They go to bed at night sure they helped. Bless their hearts.
You are certainly on the right path. Keep it up!
John's clear eyed assessment of structural economics is always good to read. I would gladly take in any of my neighbors needing temporary housing after the 2026 earthquake (we have 2 extra bedrooms) but I'm not interested in renting them out permanently and certainly not to the population at large. Fewer people and a less entitlement-minded society in 1906 was a different situation.
Great article!
You missed the obvious solution. All those tents in place on campuses in Berkeley, Palo Alto, etc. can be repurposed into permanent housing when the protestors move on to the next cause. Two birds, one stone, problem solved! This is California after all, and we certainly can't expect a response based on any rational thought process or real-world application.
Who would rent a room out in California, especially in Los Angeles or San Francisco, where the renter suddenly takes on more rights than those of the homeowner, who may not be able to terminate the agreement without an eviction proceeding -- expensive, and stacked in the tenant's favor?
The unfortunate reality is that the public is OK with this. Oregon adopted statewide rent control via referendum, and St. Paul recently adopted it as well.
I was on my NJ town's rent control board for two years in the 90s. I was appointed by the mayor, even though I made full disclosure to him that I was an opponent of rent control. On the other hand, the ordinance covered hardly any units in the town, and during my tenure we didn't have a single case come before us. That rendered my objection to the ordinance moot, since it required that any rent increases be no more than half the increase in the midpoint of the CPI for New York and Philadelphia.
Given the ongoing restrictions on importing baby formula, I know where I'm placing my bet.
What gets me is that even other economists didn't listen to Milton Friedman and George Stigler. The two of them were accused of shilling for landlords even though everything they wrote in their article was public knowledge and their arguments would have been familiar to Adam Smith.