Hot on the heels of proposing new taxes, the tyrant‘s regime is now talking about rent controls to help people struggling with the cost of accommodation.
They’ve proven that they have no real solutions for housing after abandoning their flagship Kiwibuild policy as an ignominious failure. So rent controls it is: the perfect example of what happens when you run out of ideas.
Nothing is off the table, including rent controls, as Government officials search for ways to help people struggling with the cost of accommodation, Associate Housing Minister Poto Williams says.
“I’ve charged our officials at HUD (Ministry of Housing and Urban Development) to go away and look at what are the options we can put in, in the short term, to support our renters,” she told Breakfast on Thursday.
“We’ve asked the officials to come back with a list next week of things that we can look at. There is nothing off the table,” Williams said.
“There are a whole lot of proposals that are being floated at the moment, including things like rent control and indexation. There are other things that I’ve asked our officials to look at.”
Stuff
If they are professing to help people struggling with the cost of accommodation, then rent controls are almost the very worst way to wreck a city…short of carpet bombing or dropping a nuke. But don’t believe me, believe the experts:
Rent control is one of the first policies that students traditionally learn about in undergraduate economics classes. The idea is to get young people thinking about how policies intended to help the poor can backfire and hurt them instead. According to the basic theory of supply and demand, rent control causes housing shortages that reduce the number of low-income people who can live in a city. Even worse, rent control will tend to raise demand for housing — and therefore, rents — in other areas.
Rent control, the Econ 101 student learns, helps a few people, but overall does more harm than good.
Bloomberg
Economics 101 eh? That is far too advanced for the student politicians of the regime.
Over the years, rent control has acquired a special bogeyman status among economists. Assar Lindbeck, a Swedish economist who chaired the Nobel prize committee for many years, once reportedly declared that rent control is “the best way to destroy a city, other than bombing.”
In the real world, of course, things rarely work exactly as they do in Econ 101. Labor markets don’t seem to follow the basic supply-and-demand model. Minimum wages don’t seem to throw many people out of work. Building more highways often increases traffic. Given the existence of all these cases where simple models break down, might economists’ negative view of rent control be unjustified?
As with so many questions, the answer can only come from looking at data. Economists Rebecca Diamond, Timothy McQuade and Franklin Qian have a new paper that looks at the effects of rent control in San Francisco, a city notorious for high housing costs. They find that the effects of rent control are pretty much what economics textbooks would predict.
Many studies rely on patchy or incomplete data, but not this one. Diamond and her colleagues used data from a private company that was able to combine public records to track the addresses of all San Francisco residents between 1980 and 2016, even if they moved out of California. This allowed them to study the effects of a change in San Francisco’s rent control policy in 1995. Previously, all small multi-family buildings were exempt from rent control, but since 1995, only buildings built after 1980 are exempt.
How did this large increase in rent control affect renters? Predictably, people subject to the new policy became less likely to move — between 8 and 9 percent less likely, over the medium to long term.
But not all renters benefitted equally. The new policy created a powerful incentive for landlords either to convert rental units into condominiums or to demolish old buildings and build new ones. Either course forced existing tenants — especially younger renters — to move. Landlords affected by the new 1995 policy tended to reduce rental-unit supply by 15 percent.
Being forced to move is traumatic. Not only is it expensive, it can take people out of their longtime communities. It also tends to hurt the most vulnerable members of society the most, since it often forces them to move to poorer neighborhoods with lower education levels and higher unemployment.
There are two other important but invisible groups of people who were hurt by San Francisco’s rent policy. First, there are people who want to move to the city, but can’t. Second, converting apartments into condos reduces the supply of rental housing and raises rents. The authors’ model estimates that the 1995 policy raised rents in San Francisco by 5.1 percent. That is certainly an unwelcome development in a region plagued by high housing costs.
So rent control helped some people and hurt others. How can these effects be weighed? Diamond and the others constructed an economic model of the demand for housing that let them measure the utilitarian consequences of the policy, and found that the benefit to those who get to stay in their homes almost exactly balances out the various harms the policy causes. Ultimately, they say, rent control is a wash.
Bloomberg
But like all good socialists, the tyrant’s regime will believe that all previous versions of rent controls got it wrong and that their version won’t have the same outcomes.
That is why this regime is so very dangerous: they utterly believe they are doing the right thing, even when they are demonstrably wrong.
The tyrant has literally done nothing to help the poor. Raising the minimum wage will never outstrip inflation. “Healthy Homes”, while admirable in intent, simply caused rents to ratchet up. Their housing policies have seen house values rocket up well beyond the reach of those the regime professed to want to help.
Rent controls will just do the same. As my mate and mentor says, under Labour the rich get richer and the poor get the picture.
What makes that worse is that the picture they see the most is this:
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