Why Rent Control Hurts Renters | 5 Minute Video

Nicole Gelinas of the Manhattan Institute shows why price ceilings on apartments hurt those it intends to help -- but also why rent control is here to stay. She explains the background of rent control in America (focusing on New York in particular) and the negative effect it has on prospective renters and on the quality of rent-controlled apartments. Did you know that landlords of rent controlled apartments in New York City rarely improve their properties? Watch this video and learn why. Hint: They know that there's a long line of people ready to move in if their current tenants get fed up. And even though evidence suggests (and economists on the Left and Right agree) that rent control is self-destructive, the voters love it!

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Script:

There’s no hot button issue hotter than rent control. Even the most courageous politican quakes at the idea of opposing it. For starters, no one likes landlords. Second, those who benefit from rent control -- and there are a lot of them -- vote. And it has huge emotional appeal.

Imagine this six o’clock news story: a reporter interviews a senior citizen describing how she’ll have to vacate her small apartment, her home for twenty five years, if her rent control isn’t maintained. What politician wants to go up against that?

These are just a few of the reasons why, once a city adopts rent control, it’s almost impossible to dislodge it. But does rent control work? Does it lower or raise housing costs? And does it increase the building of more affordable housing? It might surprise you to know that nearly all economists -- on the right and the left -- from the late Milton Friedman to Paul Krugman agree that the answer is no.

In a survey of 464 economists in the May 1992 issue of American Economic Review, 93% said that “a ceiling on rents reduces the quantity and quality of housing available.” Why the unanimity? Because it’s an accepted economic principle that government imposed price controls -- and that’s what rent control is -- always leads to price distortions --- in this case rents.This applies everywhere, but let’s focus on New York City, the place where I have concentrated my research.

New York has the biggest rental market in the country. Of the city’s 8.2 million residents, 5 and a half million rent. And these five and a half million renters live in about 2.2 million apartments or rented houses.

Every year, a city board votes on how much owners of rent-regulated apartments will be able to charge their tenants for the following year’s one-year or two-year leases. The board members base their decisions not on supply and demand but on an estimate of how much costs such as fuel and insurance have risen. And, of course, how much of an increase voters will tolerate.

Think about what this means: the longer you stay in your apartment the more you benefit from below-market rents. Or to put it another way, why would you ever leave your rent controlled apartment?

[bernardohernandez]

I never understand how middle class people can afford NYC.

[arthurwelsh]

Thomas Sowell Basic Economics book speaks on this and breaks it down beautifully.

[FlAw]

Yes, landlords who manage properties not constrained by rent control have more cash to spend on refurbishing, repairing, and improving them, but does that happen in reality? Or, does the landlord pocket most of it for him or herself?

[formerevolutionist]

In Korea there is little if no regulation on rent (as far as I know). Yet everywhere more and more apartment complexes are going up. Way up. It is common to see nice, large apartments reaching at least 25 stories. Old apartments are demolished and bigger and better ones are quickly erected in their places. Real estate agencies are everywhere and there are several options when it comes to finding a place to live. Not bad for a country with a high population and little land, right?

If places like New York and Chicago would simply stop messing with rent, ownership, and construction, then finding a decent place to live at a decent price would be much easier.

[Ezpazmic]

This is a spot-on description of today's housing situation in Sweden.

[cjgt]

The huge flaw that wasn't addressed in this video is that if you take away rent control and the landlord's jack up the price of an apartment $400 a month how is that person going to afford to stay in the apartment? And who said the landlords will start building other affordable housing? The reason why they're so many upscale buildings is because that's where the money is.
Instead of focusing on rents, maybe we should focus on wages and why they don't keep up with the rate of inflation.

[pichirisu]

this is literal propaganda made to harm everyone under upper-middle class

[burtontech]

In Los Angeles, rents are getting out of control. $3000 for a studio apartment that is essentially a dump. Corporations are building massive apartment complexes in areas that used to be single family homes and in my experience, landlords have zero incentive to improve their properties until someone moves out. If landlords were concerned about not having money to cover maintenance, perhaps that should align with a law that requires them put the majority of rent increases into improving the property, and that cost can be amortized over time, eventually returning to the controlled rent. If all available lands are being bought up by corporations and wealthy families, then converted to apartments, the American dream of home ownership is dead.


Shelter isn't a normal commodity that can be changed on a whim... can you imagine if you went to the emergency room and they said, "well they built a stadium down the street, we're going to triple the price just for you!". Right now there are many areas where that is completely legal. Families suddenly find themselves having to leave their job or their extended family or their kids' school, over what is essentially greed. The only way to regulate that is with rent control laws.


Would you signup for a loan or a credit card that could change at any moment? Once your agreement with your landlord expires after a year, that is essentially how you're going to be living.


Developers are always going to snatch up as much land as they can and turn the highest possible profit, regardless of rent control laws. So in this video, they use the island of Manhattan, which has no land, so they essentially build apartment buildings that cater to the rich. Is that how your town works? I'm sure the vast majority of people could move to the suburbs and live there for decades, as long as their landlord isn't pumping them for as much cash as possible.


If renters have more expendable income, they are going to spread it around more effectively than the super rich landowners. It's the whole joke of trickle down economics. People that aren't being forced to live a nomadic existence are going to be more invested in their neighborhood and build more of a community.


Where developers have been allowed to build apartments unchecked, they go for the smallest units with the highest density. They say it's to provide affordable housing, but then these groups turn around and fight every initiative to require them to provide permanent affordable housing for even only a portion of their units. It's a lie for the sole purpose of lining their pockets at the expense of their community.


If you are a renter and don't support some kind of rent control, you are a fool and this video is pure propaganda funded by the developer and rental lobbies.

[danielvalleduarte]

"WHY RENT CONTROL HELPS RICH LANDLORDS TO SQUEEZE OUT THE WORKING CLASS."

[billybassman]

I live in Houston, TX where there is no cap on rent. Virtually every apartment has air conditioning, dishwasher, disposable and a fridge. The poor ones can be pretty ghetto, but nothing like you see in places like New York. $800 a month can get you a pretty nice 1 bedroom apartment. $1000 a month can get you a small 3 bedroom house or a nice apartment. The old ran down apartments are getting demolished everyday for newer ones. The only thing that sucks is most people move every couple of years, but the new apartment is usually clean and freshly painted. BTW I own a 1200 sq house and only pay $800 a month with taxes and insurance.

[SRT]

funny now in California the pricing is so high, that working people are having a harder and harder time affording to live there.

[deemann]

In NYC even with rent control the rents are to high.

[iamaleftist]

Problem here is that that the policy (rent controls) is being viewed in isolation the presumption is made that other policies can't be adopted along with rent controls.For example to address the issues in the conclusion"Harms the people its meant to benefit"It only harms them in the ways mentioned in the subsequent points, this isn't an issue in of itself, and besides those issues can be addressed."Gives landlords little incentive to improve their housing stock"Truth is they very rarely improve it anyway but this can easily be rectified with legislation dictating minimum standards of upkeep and maintenance. "Discourages construction of new housing for all but the rich"Can be solved with legislation dictating all new builds must have a % (preferably a large %) of hosing units affordable for those on average incomes. This is already a policy in many places including NYC I believe and should be made more stringent. Furthermore the problem could be solved by taking the property development market out of the hands of private profit driven companies and instead handing it to co-operatives, housing associations, and not for profits who are solely fixated on providing housing, not on making a profits. Hate to break it to you folks but Socialism works mainly because free markets don't.

[robertenglish]

Strange, isn't it, that when I ask my company for a raise, they say "We're a global economy now.  You have to compete with worker's salaries in India, Pakistan, China and Mexico."  
But when I ask my San Francisco (where I was born) landlord to compete in this same "global economy" and the landlords of China, Pakistan, India and Detroit, Cincinnati, Atlanta, Orlando, Charlotte, he says "I'm still raising your rent 15% this year".

[ibrahimozanceberut]

we dont have rent control. landlords still dont improve appartments. and charge renters for very expensive prices. for those houses which dont even have any kind of heating system. rent control is not bad. people are. especially landlords.

[NorCal-Killa]

We’ve tried your way for 20 years and rent in the Bay Area is now over $2000 per room. Time for change. Yes on 10

[getrolli]

The more I watch this channel the more I like capitalism.
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[randomism]

Have you not seen how distorted the rental prices are anyway? Can't afford to rent a home anymore because the slum lords get to report the unrented properties as lost wages on their taxes and they get a subsidy for not renting these units.

[jlei]

If rent keeps getting higher and prices keep getting up, theres gonna be a point where no one will be able to afford anything and businesses will fail. Renters will be force to lower their rent. I believe something needs to be done.

[worldgate]

So, where was the part it hurts the renters? Sounds like a case for the landlords and other wealthy who wants to fleece more people with outrageous rent.