Rent Contol: Open-and-Shut Case?

Kimberly Kathryn Phillips-Fein kkp4 at columbia.edu
Thu Jun 8 12:16:59 PDT 2000


There is no evidence at all that rent control (which as someone else mentioned, only extends for the life of the lease in SF anyway) restricts new construction. During the 1960s, when controls were much more draconian than they are now, hundreds of thousands of units were built in NYC. Land prices, the legal difficulties involved in assembling large tracts of land and most of all the evaporation of subsidies for housing at all levels of government are much more important than rent regulation in restricting new construction in NY today. If rent control were somehow responsible for the shortage of new housing units, we'd presumably see lots of construction of condos and co-ops -- which isn't happening.

Kim

On Thu, 8 Jun 2000, Brad De Long wrote:


> > > June 7, 2000
> >> PAUL KRUGMAN
> >> A Rent Affair
> >
> >> Almost every freshman-level textbook contains a case study on rent
> >> control, using its known adverse side effects to illustrate the
> >> principles of supply and demand. Sky-high rents on uncontrolled
> >> apartments, because desperate renters have nowhere to go -- and the
> >> absence of new apartment construction, despite those high rents,
> >> because landlords fear that controls will be extended? Predictable.
> >
> >This argument makes no sense. Landlords in New York have no fear that
> >controls will be extended, and it's a rational lack of fear -- there's no
> >chance of it, and there hasn't been for years. Without that assumption,
> >this whole argument falls to the ground. Sky high rents should therefore
> >lead to huge amounts of construction -- in fact, in a perfect market,
> >there would be so much construction that the price of unregulated
> >apartments would approach that of regulated apartments, on which landlords
> >still make a profit.
> >
> >If none of those things happen, and they don't, the only fair conclusion
> >is that the housing market bears little resemblence to a perfect market
> >and therefore this reasoning doesn't apply. It sure would be nice to know
> >what rules do explain the housing market. But I guess we'll have to look
> >beyond elementary textbooks.
>
> Powerful land use restrictions limiting higher density development?
>
>
> Brad DeLong
>



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