Editor’s note: The following is a lightly edited transcript of the accompanying video from professor Peter St. Onge.
Joe Biden’s handlers, desperate to take the spotlight off their candidate’s cognitive dumpster fire—as well as countering Donald Trump’s Matrix-level heroics—announced one of their dumbest plans yet: nationwide rent control.
Biden appears to be proposing a 5% cap on rents nationwide, although it’s not entirely clear from his rambling announcement declaring, “It’s time, for example, if I’m reelected, we’re going to make sure that rents are kept at 5% increase for corporate rents, for corporate apartments, and the like, and homes are limited to 5%.”
I guess you had to be there.
According to the Washington Post, the plan would strip tax benefits from landlords who increase rent more than 5%. Given current inflation, that means just 2% after inflation.
Price controls are one of the most destructive phenomena in economics, well known for centuries to cause shortages and make products crappy, in the lingo. They reduce both quantity and quality.
Price controls in housing are particularly destructive. In left-wing utopias like New York or San Francisco, they actually worsen housing shortages and increase prices while consigning the poor to housing barely fit for humans.
One survey of the American Economic Association found that fully 93% of economists agree that rent control is harmful—epic consensus from economists who rarely agree on anything. Keep in mind that the vast majority of AEA members are actually left-wing.
Why is rent control so bad?
Because by taking the profit out of renting, it decimates new construction and it chases landlords out of the business—they might convert that duplex back into a single-family home.
Many landlords walk away altogether. New York has fully 47,000 abandoned residential properties.
Studies in Massachusetts and California found rent control reduced rental units by between 8% and 14%, respectively, in the first decade alone. In the U.K., which has had rent control since 1950, the share of housing provided by private rental units dropped from 53% to just 8%.
Over time, these housing shortages can actually push prices up. For example, MNS Realty reports the average rent of a one-bedroom unit in rent-controlled Manhattan is $3,806.
Meanwhile, what housing does exist deteriorates fast once you get rent control. After all, if the landlord’s barely breaking even and there’s a housing shortage, they won’t keep the place up. They actually want you to leave so they can reset the rent.
We’ve seen this for decades in New York: eye-watering rents for apartments that are falling apart with bare light bulbs, no dishwasher or garbage disposal, and wiring from the 1920s. Whatever you do, don’t plug in the microwave while the TV is on.
So, what’s next?
Nationwide, rent control would never pass Congress. Meaning Biden’s handlers’ best shot is imposing it through government-owned Fannie Mae and Freddie Mac, who own most mortgages in the U.S. and could, in theory, dictate terms on those properties.
Thankfully, such a clear end-run around Congress would likely be struck down by the Supreme Court in the wake of its Loper vs. Raimondo decision limiting regulations.
Zooming out, as Biden falls in the polls, expect more harebrained schemes from his brain trust of White House interns, scribbling out Hail Mary’s to bribe some new voter constituency, whether college students with loans or renters savaged by Washington’s money printers.
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