Chapter 1: The Flaws of Rent Control

Proposals to impose price ceilings on rents invariably lead to shortages and a decline in the quality of available housing options.

The housing strategies put forth by the Biden administration have failed to alleviate the burden of exorbitant rental costs, and it seems a Kamala Harris administration might worsen the situation. Before stepping back from his campaign for a second term, President Biden criticized what he termed “corporate landlords,” attributing the surge in rental prices to their actions.

Rent represents the price paid for utilizing a real asset, and like all market prices, it emerges from the dynamics of supply and demand. Pinning the blame solely on corporate greed is misleading, much like how Biden inaccurately attributed rising prices to price gouging.

Despite this, Biden introduced a proposal targeting landlords with more than 50 properties, capping annual rent increases at 5%. This seemingly compassionate move was met with significant criticism from renowned economists, including those who previously served under Democratic administrations.

Imposing any price ceiling invariably results in a product shortage. In this scenario, Biden’s plan would likely deter the construction of new rental properties while simultaneously increasing demand.

In an unusual turn of events, President Biden even pointed fingers at property management software used by companies like RealPage and Yardi. These tools assist landlords in determining fair rents based on market conditions. Rather than addressing the root causes of rising costs, he chose to blame those providing information about these prices.

Harris has yet to indicate any intention to diverge from Biden’s approach. She has backed Biden’s controversial rent control proposal and her history of tax-and-spend policies suggests she would exacerbate the issue further.

During her time in Congress, Harris sponsored the Rent Relief Act, which proposed a tax credit for renters who allocated over 30% of their income to rent. This legislation reveals a fundamental misunderstanding of market economics, as it would likely escalate rental prices by increasing the financial resources competing for the same limited number of properties.

Moreover, last year, Harris publicly supported an Oregon measure that limited rent increases to 7% per year, which is 2% higher than Biden's suggested cap. Her endorsement of this initiative is significant, as it’s something even Biden refrained from doing. She remarked on social media that the Oregon governor's actions “made it easier for families to stay in their neighborhoods” by implementing statewide rent control, asserting that “No one should ever have to choose between paying their rent or feeding their children.”

Contrary to her beliefs, a substantial majority of economists (93%) argue that rent control diminishes both the quantity and quality of available housing.

Take a look at San Francisco, where Harris once served as District Attorney. Research from Northwestern University reveals that the city’s rent control expansion in 1995 led to an 83% rise in wrongful eviction claims, and the availability of rental housing plummeted by 15% as landlords exited the market in response to these policies.

The situation has not improved over the past three decades. A 2019 Stanford University study indicated that many existing rental units were converted into high-end condominiums, exempt from rent restrictions, resulting in a housing stock that caters primarily to wealthier individuals.

If Harris were to ascend to the presidency, the American public could expect soaring rental costs, fewer available apartments, and a market prioritizing luxury units over affordable housing.

It would be beneficial if any economist, regardless of party affiliation, could influence her understanding of supply and demand. Unfortunately, some individuals, including Harris, seem resistant to learning from past experiences.

This video discusses how a landlord imposed a significant rent hike following the proposal for national rent control.

In this video, experts explore the implications of Kamala Harris's tax plan on real estate and its potential detrimental effects on affordable housing.