In his Basic Economics, Thomas Sowell lays out in exacting detail how socialist housing policies – rent controls, etc – invariably lead to fewer rentals and higher rents. Unfortunately, Basic Economics is a closed book to the Australian left. Hence the Albanese government, and the Australian Greens doubly so, are espousing exactly the policies Sowell warned against.
No doubt, as socialists will, they’ll insist that their idiotic policies will work this time. But we don’t have to wait for leftist policies to fail yet again. Because we have a real-time counterfactual to the left’s delusions.
Courtesy of one of the most consequential leaders of our times, Javier Milei.
For years, Argentina imposed one of the world’s strictest rent-control laws. It was meant to keep homes such as the stately belle epoque apartments of Buenos Aires affordable, but instead, officials here say, rents soared.
Now, the country’s new president, Javier Milei, has scrapped the rental law, along with most government price controls, in a fiscal experiment that he is conducting to revive South America’s second-biggest economy.
Catastrophic! wails France24. Far right! screeches the Guardian.
Yeah, yeah… but how’s the policy actually working? Amazingly well, as it happens.
The result: The Argentine capital is undergoing a rental-market boom. Landlords are rushing to put their properties back on the market, with Buenos Aires rental supplies increasing by over 170%. While rents are still up in nominal terms, many renters are getting better deals than ever, with a 40% decline in the real price of rental properties when adjusted for inflation since last October, said Federico González Rouco, an economist at Buenos Aires-based Empiria Consultores.
In fact, across the board, Milei’s policies are having remarkable results in just a year. After decades of economic decline, where one of the richest countries in the world a century ago plunged into poverty and hyperinflation, the turnaround is stunning.
Milei’s move to undo rent-control regulations has resulted in one of the clearest-cut victories for what he calls “economic shock therapy.”
He is methodically taking apart a system of price controls, closing government agencies and lifting trade restrictions built up over eight decades of socialist and military rule in an effort that has upended the lives of many Argentines.
In a clear rebuttal of the preferred policies of the Australian left, Argentina’s housing market is showing a rapid recovery.
In Buenos Aires – a city dubbed the Paris of the South for its broad avenues and cafe culture – many apartments long sat empty, with landlords preferring to keep them vacant, or lease them as vacation rentals, rather than comply with the government’s rent law.
In 2022, there were some 200,000 empty properties in Buenos Aires, up 45% from 2018, according to a report by Cedesu, a Buenos Aires-based policy group that focuses on urban development. Finding an affordable apartment under the rent-control law was difficult.
Aldana Oliver spent about 18 months looking for a place to rent when she left home for the city of La Plata to study dentistry.
“There were few places to rent and those available were very expensive,” said Oliver. After rent control was scrapped, she quickly found a studio apartment for about $200 a month. “I found something really nice. And I got a good price,” she said.
There are losers, of course. Mostly those who’ve been squatting in tightly controlled, artificially cheapened rentals.
Still, rental prices appear to be stabilising. Monthly price increases are now at their lowest rate since 2021 as more apartments become available, according to Zonaprop, Argentina’s largest real-estate website.
Across the Argentine economy, Milei’s free market economics are revitalising the economy.
The Milei administration has also scrapped price controls on staples such as milk and sugar. The president lifted controls on cooking gas, removed export controls on beef and cut government requirements to import steel, hoping to ease construction costs.
There is naturally some short-term pain – and, just as naturally, the left are pouncing on it to try and tear down what is an existential threat to their dearest-held beliefs.
Milei, a libertarian economist, long warned Argentines that his free-market changes would initially make conditions worse before they got better as he slashed public spending to tame inflation. He said it was necessary to unravel tight economic controls he inherited from the previous, left-wing Peronist government, which implemented price controls on some 50,000 products from food to clothing as part of its Fair Prices program.
Milei says his measures are delivering results.
The left-media are pouncing on projected inflation of 18 per cent. What they neglect to mention, though, is that that’s down from a staggering 237 per cent under decades of socialism.
“They inherited a disastrous economic situation, and getting out of this mess will take time,” said Alberto Cavallo, a professor at Harvard Business School who has studied Argentina’s price controls.
At least for now, the housing market is thriving. Opponents of price controls say Argentina is a cautionary lesson for officials from the US to Europe who have looked to curb surging housing costs with rent controls.
So, expect the attacks from the left-establishment to ramp up.
