Ideas that start on the progressive fringes have a way of becoming government policy these days, as President Biden’s $400 billion student loan cancellation shows. Lo, Democrats in Congress are now pressing the President to impose rent control nationwide.
The White House is considering a series of executive actions that are ostensibly intended to protect tenants. Rents on average increased 17.6% in 2021 and another 3.8% last year. One culprit was near-zero interest rates while they lasted, which inflated housing prices and made it harder for young people to buy a home. The result: More demand for rental housing.
Landlords also raised rents to cover losses during the Centers for Disease Control and Prevention’s pandemic eviction moratorium. But rents have fallen for the past four months, and the nation’s rental stock is expected to expand this year by the most in four decades.
Progressives nonetheless want to use rising rents as a pretext to nationalize local housing policy. Fifty Democrats in Congress last week sent a letter urging Mr. Biden “to pursue all possible strategies to end corporate price gouging in the real estate sector and ensure that renters and people experiencing homelessness across this country are stably housed this winter.”
Some Democrats blame price-gouging for any price increase anywhere. But more than 70% of rental properties are owned by individuals, many of whom are seniors and live off the payments. They have to pay bills, too, including mortgage interest payments, property taxes, insurance and maintenance, all of which have increased with inflation.
Democrats want the Federal Housing Finance Agency (FHFA), which supervises government-sponsored enterprises Fannie Mae and Freddie Mac, to establish “anti-price gouging protections” and “just cause eviction standards” in rental properties with government-backed mortgages. These are their euphemisms for rent control and eviction bans.
Democrats also want the Federal Trade Commission to issue “new regulation defining excessive rent increases” as an unfair trade practice. This would be an enormous usurpation of power since the FTC can only regulate interstate commerce and activities that affect it. Most landlords aren’t engaged in interstate commerce, and housing is regulated by states and localities.
Democrats also want the White House to dictate local housing policy by conditioning Department of Housing and Urban Development (HUD) grants on localities “mitigating cost burden and adopting anti-rent gouging measures.” So if cities want federal funds to build more housing for their homeless, they’d have to cap rents.
If there’s any consensus in economics it’s that rent control achieves the opposite of its intended goal. It leads to housing shortages by discouraging new development and maintenance of existing properties. Rents rise faster in properties not subject to controls. Even 60% of California voters rejected a ballot measure in 2020 to expand rent control. We can hope the White House pushes back against this economic destruction, but the last two years aren’t cause for optimism.
