by Mitch Kokai
Senior Political Analyst, John Locke Foundation
This past weekend, the 2020 Democratic contender tweeted, “We need nationwide rent control,” in a nod to his recently unveiled “Housing-for-All” plan, which includes a nationwide cap on rent increases, prohibiting rents from increasing more than 3 percent per year or 1.5 times the Consumer Price Index. There are quite a bit of economically tone-deaf elements to Bernie’s plan, but the suggestion of nationwide rent control is perhaps the most egregious in terms of promising the most disastrous results.
There are few principles in economics that receive near-universal consensus from economists, and the notion that “rent control is bad” is one of them. The economics behind why rent control tends to destroy rental markets under the auspices of trying to help renters is straightforward.
Once a price cap is established, it becomes harder for landlords to justify investing in upkeep of their properties if they don’t get to see reward from such efforts in the form of being able to charge higher rent. In the more extreme cases, the inability to charge market prices compels landlords to pull their properties from the market. This pressure on landlords has a two-prong effect over time: it reduces both the quality of the current supply and the quantity of current supply.