Rent control reduces housing supply

From Cafe Hayek.

"The Editorial Board of the Washington Post makes the case that Comrade Mamdani’s rent-control policy violates the takings clause of the Fifth Amendment.

A group of landlords has filed suit, arguing that the mayor’s office improperly interfered in what should be an independent regulatory decision. The board is also required to conduct an independent economic analysis before a vote, but the plaintiffs say the board had already made up its mind.

After her resignation in protest ahead of the vote, the board’s former landlord representative, Christina Smyth, said the members crossed a “legal line” because their vote wasn’t based on evidence.

A court overturning the rent freeze would be an economic gift for the democratic socialist, even if he doesn’t realize it.

New York’s rent-stabilized housing market is near its breaking point. Before the new policy, landlords were only allowed to raise rents 3 percent per year, which often did not cover maintenance costs. Nearly 60,000 rent-stabilized apartments in the city were vacant last year. That’s an increase of 8,000 from the year before.

Expect more vacancies when the freeze goes into effect in October. When San Francisco implemented rent controls in the 1990s, housing supply dropped by 15 percent."

Does Rent Control Redistribute from Poorer to Richer?

From Jeffrey Miron.

"Rent control policies are gaining momentum on the campaign trail and in state houses. New research, though, confirms something economists have argued for a long time: rent control has serious adverse effects that undermine its rationale..

The study

examines the effects of a rent control ballot measure passed in Saint Paul, Minnesota, in November 2021, on property values. … [Researchers found that t]he law decreased rental property values by reducing expected future rental income and landlords’ incentives to invest in maintenance.

In addition,

the effects of Saint Paul’s rent control law varied significantly by the income levels of renters, landlords, and owner-occupants. On average, rent control generated financial gains for renters and losses for owners, as expected. However, higher-income renters gained more than lower-income renters. … [Also,] lower-income landlords lost more wealth relative to their income than higher-income landlords. Finally, owner-occupants, despite not directly participating in the rental market, bore the greatest share of the total losses.

The study

shows that the benefits of Saint Paul’s rent control law are distributed regressively to renters, while the costs are distributed regressively to landlords."

Rent Control: The Ceiling Trap

From Alex Tabarrok.

"Rent control is in the news again. Check out my new website, Rent Control: The Ceiling Trap. Here is just one bit:

Norway abolished its rent control in 1982, and the economist Are Oust realized the newspapers had been quietly recording the whole experiment. He collected housing classifieds from Oslo’s Aftenposten from 1970 to 2008 and watched the market turn inside out.

Under rent control, Oslo’s listings pages looked nothing like a housing market. It was tenants who advertised, pleading their qualities to landlords — “housing wanted” ads outnumbered “housing for rent.” Ten to fifteen percent of those ads were placed by the tenant’s employer, vouching for them the way a bank vouches for a borrower. Tenants offered babysitting, gardening, snow-shoveling, and janitorial work on the side to sweeten the deal. Landlords, for their part, could demand a tenant of a particular gender, age, occupation, region of origin — some ads specified “strong Christian beliefs.” Deposits commonly ran to 50 or 60 months’ rent, occasionally 100 or more: tenants effectively lent the landlord the equity of the flat, interest free. And only about 20 percent of “for rent” ads dared print the rent, much of which would have been illegal.

Then the ceiling lifted. Within a few years the page flipped: landlords advertised to tenants, roughly 80 percent of listings printed an asking rent, the mega-deposits vanished, and the demands for snow-shoveling Christians of specified gender dwindled to nothing. The price went back to doing the rationing — so nothing else had to.

Check out the whole thing–it’s fabulous."

Impact of rent control in Buenos Aires

Tweet from M. Nolan Gray.

"I haven't studied it in detail, but from what I have seen, the natural experiment that Buenos Aires ran over the past six years seems like yet more clear evidence that rent control limits supply and (ironically) raises rents." 

 

Socialist economists used to say that rent control was the most efficient way to destroy a city—except for bombing

See Rent Control is Worse than Bombing by David Henderson. He goes on to explain why it might be worse. Excerpt:

"[Gunnar] Myrdal stated, “Rent control has in certain Western countries constituted, maybe, the worst example of poor planning by governments lacking courage and vision.” His fellow Swedish economist (and socialist) Assar Lindbeck asserted, “In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing.”" 

Upward Mobility May Begin In a Smaller Backyard

See  How to Stop the Affluent From Rigging the Housing Market. NY Times editorial. Excerpt:

"The median house [in Massachusetts] costs almost $700,000, the third highest among states."

"The main reason is that Massachusetts has not built enough to keep up with its growing population and economy. Its municipalities tightly limit new home construction through a combination of onerous zoning and permitting rules."

"When it comes to housing policy, the state of Massachusetts is often a bystander, allowing town governments to impose classic “not in my backyard” policies."

"Many of the country’s strongest job markets are in coastal regions that have refused to build enough new housing." 

"The initiative [a ballot initiative to override stifling local housing rules] would prevent many towns from setting needlessly large minimums for lot sizes and effectively blocking the construction of middle-class homes."

"many Massachusetts towns require house lots to be at least 20,000 square feet, which is larger than most midsize supermarkets, like Trader Joe’s. Nationwide, only about one-fifth of homes are built on such large plots."

"The initiative would create a statewide minimum of 5,000 square feet, which is about the size of a basketball court, and bar towns from setting their own standards."

"The initiative would create a statewide minimum of 5,000 square feet, which is about the size of a basketball court, and bar towns from setting their own standards."

"Yet if the United States has any chance to reduce wealth inequality, increase economic mobility and help more people achieve the American dream, it needs significantly more housing. Blue states like Massachusetts need to be part of the solution."

"Andrew Mikula, the leader of the initiative, estimates that it would allow the construction of a few thousand new homes each year. That is far from enough new housing to meet demand, but it is a meaningful step. It should be accompanied by other changes, including allowing the construction of more multifamily homes, such as duplexes, and apartments. Other places, including Austin, Texas; Minneapolis; and Raleigh, N.C., have kept home prices down by allowing more multifamily homes than Massachusetts does."

"Unfortunately, the anger over high housing prices has also raised the possibility that Massachusetts voters will approve a different ballot proposal this fall that would be counterproductive: statewide rent control. It might sound like a solution, but it would discourage construction and renovations. Artificially low rents make it harder for developers to recoup the costs of building. Rent control has not solved the housing problems in New York City, and it will not solve them in Massachusetts. The national pattern is clear. The way to bring down housing costs is to increase housing supply. The initiative to create a statewide lot-size minimum would help accomplish this."

"Democrats . . . should address the largest cost for many families and stay true to the long progressive tradition that prioritizes upward mobility. They must bring down the high price of housing in the states they govern." 

Rent Control: Do Economists Agree?

By Blair Jenkins. From Econ Journal Watch in 2009.

"Abstract 

Rent control is usually introduced to economics students as a price ceiling and an unambiguous source of inefficiency. Early rent controls mirrored price ceilings, but by the late 20th century the majority of controls had developed into complex systems. This paper organizes the judgments of economists regarding the impact of rent controls in the American context. Research is limited to jour- nal articles listed by the american economic association’s electronic bibliogra- phy, econlit, under the subject search “Rent control” performed February 18th, 2008. Articles must also meet the following criteria: the article focuses on rent control policies; data come from U.S. cities; and at least one author must be an economist. An economist is defined as any individual who holds a degree in the field of economics. I focus on the articles generated by the search in EconLit, but also include articles not in the EconLit search, but referenced by articles that are. i have been scrupulous to include any such once-removed articles that go against the main tendency of the literature, and hence assure the reader that my efforts have not accommodated a “picking and choosing” bias on my part. I find that the preponderance of the literature points toward the conclusion that rent con- trol introduces inefficiencies in housing markets. Moreover, the literature on the whole does not sustain any plausible redemption in terms of redistribution. The literature on the whole may be fairly said to show that rent control is bad, yet as of 2001, about 140 jurisdictions persist in some form of the intervention."

Spain’s Rent Control Is Failing—Argentina Shows a Better Way

By Marcos Falcone of Cato.

"On Friday, March 20, in light of the Iran war, which has pushed up energy and other prices, Spanish Prime Minister Pedro Sánchez announced measures to lower the cost of living. Rent control was included among those measures, even though it is already failing in Spain. 

Reportedly under pressure from one of its left-wing coalition partners, Sánchez decreed a nationwide contract extension at current prices for rentals about to expire, effectively amounting to a rent freeze. He has also instituted a 2 percent annual cap on rent increases through the end of 2027, which will apply to existing contracts currently indexed to inflation.

Ironically, a report published by the Instituto Juan de Mariana the same week as Sánchez’s announcement shows the extent of the harm that various forms of rent control are already causing in Spain. Following the introduction of rent caps in the region of Catalonia in 2024, the supply of rental housing has declined by 23 percent. Even more dramatically, the city of A Coruña and the region of Navarra saw rental supply fall by 44 percent and 51 percent, respectively, only six months after they designated certain areas as “stressed” housing markets and also imposed rent caps. In a country with an estimated deficit of 700,000 housing units, rent control is making things even worse.

Rent control in Spain not only cuts supply but also fails to improve conditions for renters. As the Instituto Juan de Mariana shows, wherever rent control has recently been introduced, average rental unit space has decreased, and prices per square meter have either stayed the same or increased—in Barcelona, for example, prices reached a record high in the third quarter of 2025.

The Spanish experience contrasts sharply with Argentina’s, which has adopted the exact opposite approach since Javier Milei became president in December 2023. Before then, listings had plunged by 53 percent following the passage of a rent control law in 2020. But after Milei repealed it ten days after taking office, supplies rose by a staggering 180 percent less than a year and a half later. (My colleague Ryan Bourne and I documented that extensively here). As of December 2025, rentals in the city of Buenos Aires were still almost 30 percent down in real terms from two years before, and supply has not declined.

Rent control does more harm than good, as Ryan Bourne explains in The War on Prices. Hopefully, Spain will correct course as Argentina did before things get much worse."

A Defense of Landlords as Financial Intermediaries

By Jonathan Hofer, Christopher J. Calton, Kristian Fors, Caleb Petitt of The Independent Institute. Excerpt:

"A persistent misconception is that rent simply equals the cost of ownership plus a profit margin. A crucial economic principle is that input costs do not determine prices; the value of outputs determines them. Input costs are important insofar as they affect supply. In a market, rent is determined by supply and demand for housing services, not by a landlord’s costs. The landlord’s cost structure is largely irrelevant to the market-clearing price. 

The difference in monthly costs between owning and renting in large cities can be great. For instance, the typical monthly rent for a two-bedroom apartment in San Francisco can be a few thousand dollars less than the monthly mortgage payments, including principal and interest, for a similar property. This trend is observed in many areas across the United States, especially in regions experiencing rapid growth or facing macroeconomic conditions in which interest rates rise quickly. 

Characterizing landlords as reaping significant profits oversimplifies the situation by failing to account for the broader financial context and the risks landlords face. Successful landlords may make great gains nominally, but the typical yield on a unit is actually quite low. In some states, yield (income generated by the property expressed as a percent of the asset’s cost) can be around 6-7%, but large cities tend to have a lower yield, typically around 2-5%—an amount insufficient to change a renter’s ability to generate wealth. 

While tenants pay a fixed rent, landlords bear unpredictable, non-negotiable costs, such as maintenance. Maintenance can include routine wear and tear, as well as catastrophic repairs or the replacement of costly appliances. Landlords are contractually and, oftentimes, statutorily obligated to maintain the unit’s full “output” value. If the property depreciates, that is another cost absorbed by the landlord and not the tenant. They also have to bear the financial risks of legal compliance, which can include costs related to having tenants, such as rent controls, or general risks, such as insurance. When landlords have negative carry (when monthly rental income falls below the combined costs of debt service, maintenance, and taxes), landlords are effectively subsidizing tenants. That latter point might be obvious, but what may be less obvious is how common negative carry actually is. According to a report by DoorLoop, only “35% of landlords say their rental properties are profitable year after year. This percentage held steady from 2023 to 2024 even as rental prices rose sharply.” and “38% of landlords say their rental properties break even financially (mortgage and expenses) but don’t generate consistent profit.”

A significant and underappreciated advantage for renters is the ability to benefit from a landlord’s historical investment. A landlord who acquired a multi-unit building a decade ago operates on a cost basis, and likely a mortgage interest rate that is no longer available in the current market. Due to the lower entry price, the landlord can accept a lower yield (rent as a percentage of the current property value) than a new buyer could achieve. For those familiar, this can be illustrated by the standard supply-and-demand model: landlords who bought at different prices shift the supply curve to the right, resulting in lower equilibrium rent than if units had to be financed at current prices. 

This creates what might be called a travel-back-in-time effect. Renting from an established landlord allows tenants to access housing at a price point anchored to historical costs, effectively insulating them from the full impact of rising interest rates and price appreciation. For individuals seeking to maximize net worth, the cost of paying a landlord’s overhead can be substantially lower than the opportunity cost of committing a large down payment to an illiquid, concentrated asset.

Economies of scale

Beyond historical cost advantages, scale matters. Landlords, particularly those managing multi-unit developments, generate value through operational efficiencies that single-family homeowners cannot replicate. Research on rental housing economies of scale demonstrates that costs per unit tend to decrease as the number of units increases, due to shared infrastructure, bulk purchasing power, and specialized management. This scale efficiency manifests in several ways. By pooling costs, landlords can lower the price of housing services for tenants. The development costs of new or renovated housing can be reduced through bulk orders with suppliers and vendor consolidation. Renters in multi-unit buildings benefit from shared infrastructure, such as roofs, foundations, and HVAC systems. These shared resources, when calculated per square foot, are significantly more efficient than those in single-family homes.

Creating a Buffer for Renters

By leveraging the historical cost advantage borne by the landlord, renters effectively gain a competitive financial buffer. Renters can secure a similar consumption good, i.e., shelter, at a discount relative to the current frontier cost of a mortgage. The delta between the market rent and the counterfactual homeownership scenario allows renters to use different wealth-generation vehicles. 

That means that renting is not “throwing money away”; rather, it is the purchase of a thing without the attendant risks of over-leverage, illiquidity, and concentrated asset exposure. By assuming the risks of property devaluation, legislative changes, physical depreciation, and liability, landlords enable tenants to allocate capital toward other potentially liquid uses, including seeking higher returns on capital. When that occurs, landlords are not barriers to wealth, but rather, providers of financial flexibility and absorbers of real estate volatility, enabling tenants to maintain optionality. If renters allocate the capital intended for a down payment to a diversified portfolio of equities, they may often achieve returns greater than those of a single property.

Obviously, this relationship is not without trade-offs. Renters face the risk of eviction, rent increases, and limited long-term security. These vulnerabilities can have significant financial and emotional impacts. However, these challenges do not negate the fundamental economic function landlords serves.

Do Landlords Hoard Units? 

Some affordability activists make the claim that landlords are “hoarding” tens of thousands of unoccupied units, such as the oft-cited figure of 60,000–90,000 vacant homes in San Francisco. This is a curious argument and may imply some ignorance of how housing markets, and markets in general, function. Supply and demand never achieve perfect, instantaneous matching; some inventory is always in transition or needs to be called up. High rents and prices in places like San Francisco are the market’s clearest signal of insufficient supply relative to demand, not evidence of deliberate withholding.

Even still, the “vacant units” number is largely a mirage. Census and city data include short-term vacancies, units between tenants, in the process of being sold, renovated, or prepared for re-rental. Many others are unfit for habitation (e.g., severely dilapidated or in need of major repairs), or are simply not rentable or sellable at current market conditions without significant investment. Recent reports show San Francisco’s effective rental vacancy rate (units actually available and ready for occupancy) hovers around 3–5% in 2025–2026, among the lowest in the nation and well below a reasonable benchmark for smooth turnover. While overall reported vacancies include these transitional categories, they don’t represent “hoarded” stock. True long-term deliberate vacancies (e.g., vacation homes and luxury units held empty for speculation) exist but are a tiny fraction, not enough to suppress prices meaningfully.

Some of these activists have proposed an “empty homes tax” to penalize landlords who have vacant units. Such a scheme discourages investment because it erodes a landlord’s margin, as there will inevitably be durations when tenants churn. It may also discourage upkeep, as landlords may avoid taking time to renovate between occupants because that is a period when they would be taxed. 

Even if some curmudgeony owners were trying to “hoard” for profit, ironically, adding substantial new supply would undermine that strategy by increasing competition and capturing those potential gains for different landlords/developers and future residents instead. The real delusion is pretending that vacancies prove abundance when they coexist with skyrocketing costs, precisely because overall long-run supply has failed to keep pace with population and job growth in high-demand areas."

How Mamdani and Cea Weaver Plan to End Private Housing

Their proposals would make many apartment buildings impossible to sustain. That’s by design.

By Allysia Finley. Excerpts:

"Ms. Weaver’s crowning achievement is a 2019 state law that restricts New York City landlords’ ability to pay for renovations by raising rent and does away with the ability to deregulate rent-stabilized units—which account for nearly half the city’s rental housing—when tenants move out. The law upended landlords’ investment models, slashed building values, and fueled runs at two regional banks."

"The Federal Deposit Insurance Corp. struggled to find a buyer for Signature’s toxic $15 billion in mortgages that were backed mostly by rent-stabilized buildings."

So the FDIC turned over management of many of the buildings to a collective of nonprofits with financial backing from the New York City Employees’ Retirement System. A year after Signature’s collapse, New York Community Bancorp (now Flagstar) triggered a panic when it flagged that 14% of its $18 billion rent-regulated loan book was at risk of default."

"Rent-stabilized buildings have been selling at steep discounts, some for less than the cost of a NYU degree."

"A rent-stabilized building in East Harlem this spring sold for 3% of its 2016 sales price. A city pension fund investment in rent-stabilized housing—once projected to mint eye-watering returns—has declined by 70% since the 2019 law was enacted."

"The city pays nonprofits up to $380,000 a unit to repair dilapidated rent-stabilized apartments, which can exceed the market value of the entire buildings."

"A private real-estate firm has sought to buy Pinnacle’s rent-stabilized apartments in bankruptcy for a pittance. But a city attorney tapped by Mr. Mamdani last week sought to block their sale by arguing to the judge that—get this—rent restrictions would prevent the firm from maintaining the units." 

Apartment rents drop further, with vacancies at record high

By Diana Olick of CNBC. 

• The national median rent for apartments fell 1% in November from October, and now stands at $1,367, according to Apartment List.
• The national multifamily vacancy rate was 7.2% in November, a record high.
• The historic surge in multifamily construction over the past few years is now pulling back, but a good supply of new units is still coming online at a time of much weaker demand.

 

Everyone Is Talking About the ‘Affordability Crisis.’ It Can’t Be Solved.

Trump and Mamdani both campaigned on affordability, but the issue is amorphous and poorly defined

By Greg Ip. Excerpts:

"Like the climate crisis or the crisis of democratic legitimacy, the affordability crisis has become an umbrella term for countless loosely connected phenomena."

"Like those other crises, this one defies definition and thus resolution."

"Inflation reached 9% in mid-2022 but was down to 3% in September."

"Real personal income was up 2.3% in the year through August, and real hourly wages climbed 0.8% in the year through September, both in line with the 19-year average."

"Because there is always something going up in price or someone whose incomes are suffering, affordability is an especially potent issue"

"There is nothing any elected official can do to “solve” the affordability crisis reliably."

"For prices merely to stop rising for a year (i.e., an inflation rate of zero), would probably require a deep recession."

"Housing affordability is now slightly below its pre-2008 average, according to the National Association of Realtors, so room for improvement is limited."

"New York isn’t expensive because of public transit. When the fare rises to $3 in January, it will have climbed an average of 1.7% annually over the past decade, below the city’s inflation rate."

"New York rents have gone up a lot recently, while they have stabilized or fallen in other cities thanks to a surge of supply." 

Price Control Apologia

By John Cochrane. Excerpts:

"the glaring elephant-in-the-room Econ 101 issue: Budget constraints. Every dollar of “relief” for one party is a dollar of “burden” for another, plus the inefficiencies of redistribution.

Sure, “sharply rising rents and utility bills wreak havoc on family budgets,” if the families don’t follow the screaming market signal to move. (Which is not painless, for sure. Incentives never are.) But the money comes from somewhere. Rent controls and energy price caps wreak havoc on landlord end electric utility budgets. The money must come from somewhere.

A rent control is the same as a tax on landlords used to subsidize the rents of current tenants. You may picture a giant corporation, but many landlords are sympathetic individuals who worked hard and saved and use the apartment to fund their retirement. Corporations are owned by the 401(k) plans of sympathetic workers too. But economists should know better than to tug on your heartstrings for who should get resources forcibly taken from who else. If you ask “what’s the optimal way to tax people in general in order to lower housing costs for a politically attractive group (current tenants)” the screaming answer is not “let’s tax the people who currently own the buildings.” Sure, “tax the rich.” If you want to go down this route, it’s a lot more efficient to tax all the rich. If you ask “what’s the optimal way to help families who just got stuck with higher rents,” the screaming answers is “send them a check, but then let them move to the apartment that best fits their needs.”

A rent control only makes rental “affordable” for the lucky recipient. It does not make rental housing more “affordable” for society as a whole. It does not increase the number of people who have housing. Indeed it reduces that number. It just changes who gets it. It does not even make housing more “affordable” on average. For those who want it must now pay with time, and inconvenience, or pay by foregoing the great opportunities that moving to the city provided.

The biggest losers of rent control are the young, the mobile, the ambitious, immigrants, and people without a lot of cash. If you want to move from Fresno to take a job in San Francisco and move up, and you don’t have millions lying around to buy, you need rentals. Rent control means they are not available. Income inequality, opportunity, equity, all get worse. 

There is no blob of “government” money, or “policy” that can make something affordable for one without making something else less affordable for another."

"Supply does not need “tax incentives,” which are usually specific to a project and negotiated between developers and politicians. This is showy stadium construction finance, which does little for broader prosperity. Supply needs “get out of the way,” starting with reducing the taxes we have now. The problem with “regulatory barriers” is not that on removal it takes years to build housing, it’s that it takes decades to remove regulatory barriers. Remove the barriers tomorrow — zoning, planning, density and height restrictions, dozens of separate permits, labor restrictions (unions, high minimum wages), and so on — and you could get actual new housing before the next presidential election."

"Everyone is focused on building, but “supply” is so much more than building. There is tremendous supply in using more efficiently what we have now. Most cities have laws against renting parts of single family homes, or sharing larger homes. Think how many spare bedrooms are empty every night. There is plenty of housing supply in the US, it’s just not in places where people want to move. Others moving out is “supply,” and greatly impeded. Older people stay in too-big houses and apartments, in locations close to work and school opportunities that young families desire, but the older people no longer need. Why? If they sell, they are taxed on capital gains, even just due to inflation. They lose property tax exemptions, and, of course, rent control protection. Each older person who cashes in, downsizes, or moves to a neighborhood more suited to them, supplies a house or apartment. The non-portable fixed rate 30 year mortgage, an invention of our federal housing subsidy regime, leads people to stay where they are rather than move to where they want to go, and free up a scarce house or condo for someone else. Strong apparently “consumer protection” laws in rental contracts dry up the supply, especially to the marginalized. If you can’t kick people out, you’re much more careful who you let in. Limits on short term rentals limit rentals. Remove rent controls, permanently, and houses and condos can be rented. Many houses and apartments need rehab, not new construction, which can happen very quickly once owners know they will not be robbed of their investment. Even “affordable” housing leads people to stay where they are, rather than move to better opportunities for them and free up an apartment for someone else, because it’s rationed with long waiting lists."

"When Javier Milei ended rent control in Buenos Aires, rent went down. Instantly. Nothing had to get built. It can happen in Manhattan.

Nothing rings more true of our government than restrict supply, subsidize demand, and watch prices skyrocket. Universities and health care are poster children along with housing and energy. “Landlords” and “utility companies” are not, in fact, making a killing here. Land owners benefit. Energy faces rising costs like anything else. AI, not corporate apartment companies, electric utilities, and oil companies, are the hot stocks of the moment."

"rent controls are . . . exactly the same thing as a tax on suppliers used to fund demand subsidies. With a fixed supply, the number of people who have houses is fixed. The only effect of rent controls or demand subsidies is to change who gets the houses."

"Oh, please. New York put in “temporary” rent controls in WWII. 80 years ago. Congress passed “temporary” Obamacare subsidies during the pandemic, and we just shut down the government for a month and a half over that. “Rent caps on existing units” have been tried by every single failed rent control regime in history. Tax away the hard-earned investment of existing landlords. But apartments need maintenance and even the Times (can’t find the link) runs stories of apartments vacant in Brooklyn because it’s not worth it for landlords to fix them, since they were built before the last “existing unit” freeze in 1974. Plus, every investor knows that what can be done “just this once” can be done again. “Government investment in new housing?” California specializes in that, featuring $1 million one bedroom units for homeless people. Come tour the ruins of Chicago’s housing projects. And once again, just where is this endless pot of money? Let’s see, 3 million homes at $500,000 per home is $1,500,000,000,000 yes one point five trillion if I got my zeros right. Not exactly couch change on the government budget."

"You must live in quite a bubble not to know about the trillions of “government investment” in solar panels and windmills we already have. California leads the way. And also has the highest gas and electric prices in the nation. And you must have forgotten a lot of economics to not recognize that “household budgets” also have to pay the taxes that pay for these “investments.” California’s electric utilities and refiners are barely scraping by, rather than being effective pots of tax money, so that “shielding” of some household’s budgets will come from other households.

Energy prices have if anything more incentive effects than housing, and are more elastic in the short run. If gas prices go up, you can car pool, take transit, bike, or just drive less. Or move closer to work. Except rent controls mean you can’t. Energy is a smaller component of income. Another textbook rule of economics: don’t mess with price signals, especially of elastically demanded goods that are a small component of budgets, in order to transfer income. Energy subsidies do the opposite."

"price controls that have been tried since Diocletian (300AD) and failed every single time"

"Many rent or price controls in the 1,700 years (and likely more) on this earth have promised to be temporary, targeted, combined with structural reforms. I cannot think of a single one that ever has done so. If you want Mamdani to succeed politically, you will do a lot better to advise him against self-delusion not to pander to his ill-informed instincts."

"A last thought. Mamdani, if he does follow through on his policies, will indeed make Manhattan much more “affordable.” Chase away all the wealthy people, all the businesses and business owners, and apartments will be cheap. Detroit is affordable too. Be careful what you wish for, you just might get it."

Mamdani’s Rent Freeze Would Sink New York Landlords

‘It would make me lose my building. It would destroy me,’ says Sharon Cohen, an owner in the Bronx.

By Howard Husock. Mr. Husock is a senior fellow at the American Enterprise Institute and author of “The Projects: A New History of Public Housing,” out next month. Excerpts:

"Under New York’s rent-stabilization regime, a board appointed by the mayor sets rent levels—and must approve any increase—for 960,000 rent-stabilized apartments, nearly a third of all the city’s housing units. In 2017 and 2018, under Mayor Bill de Blasio, the board granted no increase for one-year leases—in other words, a rent freeze. This year, under Eric Adams, the board granted a 3% increase for a one-year lease, and 4.5% for two years. That came after New York University’s Mark Willis testified that owners of rent-stabilized properties in the Bronx are, on average, losing $120 a month on every apartment."

"he could stack the Rent Guidelines Board with appointees willing to implement his freeze."

"Post-Covid, city tenant-protection laws limit any concern of eviction."

"it takes two years to evict a tenant of a rent-stabilized apartment in the Bronx for nonpayment of rent. For an eviction to be approved, landlords must first correct any housing violation—even if they aren’t getting the rental income they need to pay for such repairs. What’s more, nonpaying tenants can apply to the city for “one-shot deals”—an emergency rent-assistance payment to cover large amounts owed. Payments may not cover the full amount, says Ann Korchak of the Small Property Owners Organization of New York, and they come with a one-year no-eviction clause." 

"A great deal of the city’s housing stock is price-controlled, including the rent-stabilized stock and an additional 177,000 public housing units. Still more is income-restricted—including 50 city and federally-subsidized developments with “affordable units” set aside for those with 60%, 80%, or even 120% of median income. All this creates incentives for tenants to stay put in their apartments—even if they no longer need as large a place as they once did. According to the U.S. Department of Housing and Urban Development, 30% of New York City Housing Authority tenants are “over-housed,” meaning they have empty bedrooms. Low turnover in regulated units drives up prices on market-rate units. New York’s renter turnover rate since 2021 is 19% lower than the national average. That’s one reason rents for available units keep rising even as the city has been losing population." 

This Law Could Tip New York’s Housing Market into a Death Spiral

If left unreformed, Good Cause Eviction could shrink rental supply, reduce quality, and increase blight.

By Jen Sidorova. She is a policy analyst at Reason Foundation and a Ph.D. candidate at Georgia Institute of Technology.

"On April 20, 2024, New York State enacted its Good Cause Eviction law. The law applied immediately to New York City; other municipalities could opt in. Since then, more than a dozen cities have adopted it, including Albany, Rochester, and Binghamton.

Given that 45 percent of New York households rent, including 70 percent in New York City, the law could reshape housing markets across the state—for the worse. If left unchanged, Good Cause is likely to shrink rental supply, shift ownership toward large institutional investors, and worsen housing quality. That could tip the state’s housing stock into a downward spiral much like the one New York City experienced in the late twentieth century.

Good Cause pairs onerous limits on when landlords can end a tenancy with annual rent-increase caps amounting to the lesser of either 10 percent or inflation plus 5 percent (8.82 percent for 2024). Landlords can evict only for specific reasons: nonpayment, substantial lease violations, nuisance or illegal use, major property damage, or the landlord’s intent to occupy, demolish, or take the unit off the market. Tenants in covered units are entitled to renew their leases unless one of these grounds applies.

The structure of Good Cause echoes the Rent Stabilization Law of 1969 and the Emergency Tenant Protection Act of 1974, which similarly combined just-cause eviction rules with rent ceilings. These policies slowed new rental construction, encouraged conversions, and degraded housing quality.

The long-term effects of rent control are clear in the academic literature. Under rent control, developers shift from rental to owner-occupied construction; landlords convert units to condos or co-ops; and supply in the regulated market contracts. Scarcity pushes up rents in unregulated units. Capped returns reduce maintenance because they make it harder for landlords to recoup costs. At the same time, mobility declines while tenants remain in units that no longer match their needs. Benefits often accrue to high-income, long-term tenants rather than to the low-income households the policy aims to protect.

Good Cause exempts public housing, rent-regulated apartments, new construction (for a limited time), and owner-occupied buildings with fewer than ten units. However, some cities have sharply narrowed these carve-outs. Rochester, for example, restricts the exemption to landlords who own a single rental unit, placing over 98 percent of its rental stock under Good Cause.

Owners have limited ways to offset capped rents. Evictions can take months and require legal action in nearly all cases. Faced with rising costs and procedural hurdles, many owners are likely to convert units to condos or sell to large institutional investors. Rochester’s landlords are already selling to out-of-town buyers, shifting ownership away from local operators, who have a stake in neighborhood stability. Albany, with similarly narrow exemptions, faces comparable risks.

In Binghamton, the city council overrode Mayor Jared Kraham’s veto and adopted Good Cause. More than half the city’s housing was built before 1939, and less than 5 percent since 2000. Capped rents in such a market limit funds for upkeep. In areas where many properties need significant repairs and code enforcement is stretched thin, the law may push marginal buildings past viability.

Landlords facing higher legal costs and restricted rent growth may walk away from their properties or sell to less committed owners, shrinking habitable stock and increasing blight. This is what happened with New York City’s pre-1974 rent-stabilized units.

Today, those units have the highest rate of maintenance deficiencies—leaks, broken plumbing, structural damage—averaging 75 percent more issues than newer stabilized units and 79 percent more than market-rate apartments. Since 2022, 176 rent-stabilized units have gone into foreclosure—annual foreclosures have roughly doubled each year—with over 2,000 more in mortgage-default warnings.

New York City’s rental market already operates under a highly complex regulatory system, with more than 1 million apartments covered by rent stabilization. Extending Good Cause to currently unregulated units brings more owners into a costly, restrictive system. High property taxes, steep utility bills, and some of the most expensive construction costs in the world already leave many landlords with thin margins. When expenses outpace capped rent increases, their options narrow to deferring repairs, selling, or converting units.

According to Ann Korchak of the Small Property Owners of New York, limiting rent increases “restricts an owner’s ability to maintain, upgrade, and renovate,” pushing some properties towards foreclosure. She warns that selling to “deep-pocketed corporate landlords” would accelerate the loss of affordable, family-owned housing.

The city has seen similar dynamics before. From the late 1970s through early 1990s, inflation in fuel, labor, and taxes far exceeded allowable rent increases, pushing many landlords into foreclosure or abandonment. More than 200,000 rental units were lost. In parts of the Bronx, more than 80 percent of housing stock was destroyed, often from arson linked to collapsing property values. Good Cause risks repeating this cycle, especially in older, low-margin buildings.

To prevent a repeat of the twentieth-century rent-control collapse, legislators should adjust the law to protect tenants from unjust evictions, while preserving landlords’ capacity to maintain properties. This could involve raising exemption thresholds so that smaller, community-based landlords are not driven out; allowing cost pass-throughs for documented major repairs, tax hikes, or utility increases; strengthening code enforcement and investing in rehabilitation in older markets to prevent blight; and adding sunset reviews—time-limited provisions that require the law to be revised and reauthorized—with mandatory legislative reconsideration if data show supply loss or quality decline.

Tenant stability and a functional rental market are not mutually exclusive. Without targeted reforms, Good Cause may usher in a new era of rent control with the same destructive outcomes as the last."

Mamdani and the False Promise of Rent Control

Rent control promises relief but delivers scarcity, higher costs, and fewer homes

By Sam Jenson & Jonathan Hofer of The Independent Institute. Excerpts:

"In 1994, San Francisco instituted rent control for buildings built before 1979. This rent control referendum ignited an eviction explosion; filings for eviction shot up 83 percent and wrongful eviction claims rose to 125 percent. Landlords were incentivized to evict tenants so they could charge new renters an updated market price; as the markets shifted, rent did not. 

The supply of rental housing in the city fell by 15 percent, and landlords removed their listings from the market or converted them to condos. A 2018 Stanford Business paper found that the city’s rent control expansion led to a 5% increase in city-wide rents. Further research highlights how rent control causes other negative externalities to the city and nearby residents, including reducing amenity values and indirectly raising other costs on nearby markets. 

San Francisco continues to be an example of rent control failing in a populous city; evictions shot up, and a housing shortage has ensued."

"Ireland, and particularly Dublin, has especially felt the consequences of its rent control laws. Empirical research has noted that rental supply in the country worsened after the introduction of rent stabilization in 2016. Ireland has declared that the entire country is a Rent Pressure Zone (RPZ), in which rent cannot be increased by more than 2 percent per year. 

Previously, only certain parts of the country were designated as RPZs, but this designation is national until February 2026. RPZs are not working; since the beginning of 2024, rent in the country has increased by 8.1 percent for new properties and 5.9 percent for existing housing. Landlords in the country know that they will be capped by this two percent rule, so they will continue to charge higher upfront prices to new tenants."

"Construction has stalled, and the nation is facing a yearly shortage of 20,000 units." 

"Buenos Aires is another example. In 2020, the “Lipovetzky Law” was introduced to control rent. Under this law, landlords could only adjust rental prices once a year and began receiving payments in the Argentine Peso, a currency that was rapidly losing value. Inflation in the country rose to 211.4 percent in 2023. 

Landlords increased the cost of rent, leading to an explosion from a monthly average of 18,000 pesos in 2019 to 334,000 pesos by January 2024. At the height of rent control, one in seven homes in Argentina sat empty. In 2022, 200,000 properties sat empty in the capital city. Some landlords completely pulled their properties off the market; the incentive to rent was gone.

When Javier Milei, president of Argentina, took office in 2023, he repealed the Lipovetsky Law and the effects were instantaneous. The number of available rental units increased by 170 percent and the price of rentals dropped 40 percent, compared to early 2023 levels. In Buenos Aires, “the real price of renting fell almost 27 percent in the first seven months after deregulation occurred.”"

"Austin [TX] has streamlined the permitting process, promoted mixed-use development, and upzoned swaths of the city. This influx of new construction has alleviated some of the competitive pressure in the rental market, which was previously driving prices up. Rent prices in Austin have dropped 9% since the city’s two-year high, the best in the nation."

"As Art Carden et al. previously covered, investors are not likely to finance housing projects when rent control is in place; the opportunity cost is too high. As currency inflates, investors earn less on returns. For example, current 12-month treasury yields sit at 3.91 percent. Treasury yields are generally considered low-risk because the US has never officially defaulted on its obligations (the United States government has previously had four episodes of seemingly bad-faith repayments, or at least, evasion of the spirit of the bargain; the Congressional Research Service disputes these instances as actually qualifying as defaults). Housing projects already entail enormous risk for investors, but with rent control, the desirability of pursuing these types of projects diminishes relative to other asset classes." 

  

Zohran Mamdani Wants New York City to Try Real Socialism

If AOC’s candidate defeats Andrew Cuomo in Tuesday’s mayoral primary, we’ll know who owns today’s Democratic Party

By Thomas McKenna of The WSJ. Excerpts:

"The city already prevents landlords from raising the rent more than a token amount on these units each year."

"The city’s rent-stabilization program already makes it impossible for some landlords to cover their costs. Others find it cheaper to leave apartments empty if needed repairs aren’t worth the investment. Tens of thousands of rent-stabilized units sat vacant in 2023, according to U.S. Census data. More will be empty if landlords can’t pay their mortgages, and tighter supply pushes prices up."

"no-cost public transit tends to attract more crime, homelessness and soliciting. Officials in Portland, Ore., cited upticks in each when they ended fare-free rides downtown in 2010." 

Rent Seeking for Four Generations

 By Alex Tabarrok.

"Amazing story in the Gothamist about a family that has occupied the same rent-controlled apartment for four generations and the last generation is not eager to give up the benefits:

For decades, Vines’ grandmother lived in the rent-stabilized, two-bedroom apartment around the corner from Fort Tryon Park. The unit has housed her family since 1977, Vines said, when her great-grandmother, a Cuban immigrant, moved in. Vines said she started living there part time in August 2021, when she enrolled in college in Westchester.

The building’s owner, Jesse Deutch, told Gothamist in an email that “an apartment is not an inheritance” and that Vines has not submitted the necessary documents to prove she has the right to succeed her grandmother as a tenant.

…Family members — by blood, marriage or emotional and financial dependence — can claim succession rights for a rent-stabilized apartment, but only if they can prove they lived there with the tenant for at least two years immediately before their death or permanent departure. There are exceptions to the two-year requirement, including for people who are full-time students, like Vines was when she says she was living with her grandmother.

Vines doesn’t contest that she lived part of the week in her dorm. But she said she spent long weekends, holidays and spring break with her grandmother and sometimes slept over when she had time in the middle of the week.

Now you might think you understand this story. The landlord wants to kick out the current tenant to raise the rent to the new tenant, right? No. Landlords are no longer allowed to raise the rents to new tenants (!!!). Unless the new tenant is themselves getting rental assistance!

 …the owner might also be able to boost his income if a new tenant with a housing subsidy moves in. Property records for the building show the owner is allowed to collect more than the rent-stabilized amount for tenants receiving rental assistance….As of January 2024, the maximum amount the federal Section 8 program and the city’s own aid program would pay is $3,027. That’s more than three times the approximately $900 a month Vines said her grandmother paid.

Did you get that? The city’s rental subsidy programs (like Section 8 and CityFHEPS) will pay more than three times what the current tenant does — creating a surreal incentive where landlords prefer subsidized low-income tenants over potentially middle-class legacy-tenants. Note that whether Vines gets the apartment at the rent-controlled rate has nothing to do with her income. Vines could be middle-class or a multi-millionaire and still be entitled to inherit the apartment at the rent-controlled rate, assuming her claims of having lived in the apartment hold up.

New York has outdone itself with a rent control system so dysfunctional it manages to achieve the worst of all worlds. Not only does it suffer from the usual problems of reducing the supply of housing and dulling incentives for maintenance, but it has transformed over time from a safety net into a hereditary entitlement. Thanks to succession rights, what was meant to help the poor now functions as a kind of family heirloom — a subsidized apartment passed down like grandma’s china set."

No, Immigrants Aren’t Responsible for the Housing Shortage. Here’s the Real Cause.

By Christopher J. Calton of The Independent Institute.

"Illegal immigrants are President Donald Trump’s favorite scapegoat for America’s problems. So, it is no surprise that he blames them for the housing shortage.

More surprising, perhaps, is the recent report from J.P. Morgan that offers a similar explanation.

“It is estimated that there are 11.2 million undocumented immigrants in the U.S., and that number may be higher,” the report states. “This could be ramping up housing demand more than figures suggest, resulting in a shortage of stock.”

This line of thinking is fundamentally flawed. The absurdity should be apparent when considering its logical corollary. If demand for housing causes shortages, then 11 million undocumented immigrants are a drop in the bucket compared to the more than 300 million Americans who are here legally and bidding up home prices. If only we could do something about those selfish citizens who recklessly want to buy or rent homes, housing prices would come down dramatically!

Where shortages already exist, spikes in demand can certainly make them more painful, but demand does not create shortages—at least not sustained ones. Presumably, migrants buy more than housing, but they do not create shortages in other goods because most industries are free to respond to increased demand.

Why can’t housing developers do the same? The answer is that supply constraints create shortages, and in the housing market, those constraints are imposed by local and state regulations.

The U.S. population grew from 38.5 million in 1870 to 76 million in 1900, with immigration accounting for more than 12 million new residents. Cities like New York were becoming considerably denser, but housing remained plentiful.

“A largely unregulated private real estate market drove urban expansion,” writes historian Richard White in his history of Gilded Age America. “The cities provided services property owners could use at their discretion and opened up public spaces at low cost for private developments, while at the same time placing few effective controls on the use of private property.”

The tenement apartments of the time got a bad rap, but perspective is important. Tenements were immensely affordable, yet progressive reformers convinced themselves that greater population density—fueled largely by immigrant “lodgers”—inflated rents.

“The landlord finds it easy to excuse a high rental by pointing out that the families will surely take lodgers and earn enough to pay it,” speculated one reformer in 1911. That same year, the U.S. Immigration Commission, in a special report titled “Immigrants in Cities,” found that the average monthly rent across seven major cities was only $10 (roughly $324 in 2025 dollars).

The housing movement that grew from opposition to tenements led to anti-density regulations. New York State fired the first shot with its Tenement House Act of 1901, which included open-space requirements and height limitations. Other cities followed suit. By World War I, reformers had expanded their movement through zoning laws, which became the primary tool for curbing cities’ population growth.

After the war, anti-density reformers were perplexed that builders had lost interest in producing new homes for the low-income rental market. In his 1938 book, “The Challenge of Housing,” New York’s former tenement-housing commissioner reflected bitterly that “New York and many other states ... set up standards sufficiently high to make it impossible to build houses, particularly multi-family dwellings, which could be rented profitably to the poor.”

Developers today are saddled with even more onerous land-use policies, often accompanied by stringent environmental and labor regulations that further delay or prevent development and compound costs. Zoning codes in much of the country even outright prohibit affordable housing such as apartments and mobile homes.

The simple truth is that we would have a severe housing shortage even if President Trump were to deport every undocumented immigrant tomorrow. But if cities and states deregulated their housing markets so developers could build more freely—as they could when immigration was proportionally much higher—housing would quickly become more abundant regardless of how many people crossed the border.

The longer we scapegoat immigrants for America’s self-imposed housing shortage, the longer it will take us to solve it."

Regulations Keep Millions of Bedrooms Empty During a Housing Crisis

Zoning laws, occupancy limits, and short-term rental restrictions are keeping housing off the market and driving up costs

By Howard Husock. 

"The U.S. is facing a housing affordability crisis, and new data from Realtor.com highlight an often missed contributing factor: millions of empty bedrooms. Census data reveal 31.8 million "excess" bedrooms in American homes—compared to just 4 million in 1970. Overregulation, particularly in zoning and local occupancy laws, is among the culprits.

Realtor.com tries to put a positive spin on the bad news. We have, as they put it, a record number of potential "guest bedrooms." However, there are local barriers across the country that make that option difficult and sometimes illegal—as well as regulations that actually encourage the empty bedroom phenomenon. 

To some extent, the "excess" is the result of broad social trends. Household size has been in a long-term decline, from 3.1 persons per household in 1970 to 2.5 in 2023. As Americans have become wealthier, they can afford bigger houses—and stay put even when their children move out.

But even if homeowners would like to make use of those "guest" rooms, they can run afoul of local laws. Research I conducted for the American Enterprise Institute found that in 23 of the 30 largest U.S. cities, there are laws that limit occupants deemed "unrelated," defining a "family" only as a group whose members are related by blood, marriage, or adoption. In St. Louis, no more than three unrelated persons may live together. In Sugar Land, Texas, the limit is four. Private homeowner associations may be even more strict. In the Chase Oaks Homeowners Association in Plano, Texas, a "household" can comprise no more than two unrelated persons, though there is an exception for live-in employees. 

Those who would like to form a household of five single adults or multiple unmarried couples in order to share costs are not permitted to do so—no matter how many bedrooms are available. These relics stand in the way of allowing the widowed, divorced, and never-married to build households.

Short-term rental restrictions further exacerbate the problem. In New York, the nation's largest city, such restrictions require host owners to be present when rooms are rented—and for the renters to have access to the whole house. Airbnb has called this a "de facto" ban. San Francisco requires a $975 short-term rental registration fee and imposes a hotel-level room tax of 14 percent for "transient occupancy." These cities are taking steps to limit short-term rentals rather than encouraging them. This disadvantages homeowners struggling to make their mortgage payments who could otherwise avail themselves of an additional source of income. 

According to Census data the number of "roomers and boarders" declined by at least 400,000 between 1970 and 2005. Restrictions on the "unrelated" are not the only culprits. Rent control laws—as in New York, where 960,000 apartments are price-regulated—have a similar effect. As a Brookings Institution report puts it, "Once a tenant has secured a rent-controlled apartment, he may not choose to move in the future and give up his rent control, even if his housing needs change." This "misallocation," is not without major consequences, Brookings continued, most notably "empty-nest households living in family-sized apartments and young families crammed into small studios." 

The same is true of the over 3 million units of public and subsidized housing in the U.S., whose tenants are prohibited from taking in unrelated persons not on the lease—or are subject to a higher rent if formally adding another tenant. Data from the Department of Housing and Urban Development show that 17 percent of public and voucher housing tenants are "overhoused"—they have more bedrooms than tenants. In New York City, that number is estimated to be 30 percent of the 177,000 subsidized units.

The time when extended families lived under one roof may be in the past. However, there's no reason for local laws to stand in the way of living arrangements that allow the most efficient use of the housing we already have. It's time to rethink outdated housing laws and policies that force millions of bedrooms to remain empty. Reforming these regulations is a practical step toward easing the housing crisis without building a single new home."