Bernie Sanders proved once again that he is an economic illiterate with one simple tweet: “We need a national rent control standard now.”
No, no, no, and no!
If Bernie would for once in his life open up an economics textbook, he would find that not only does rent control not make things better for low income folks, it makes finding housing much more difficult.
One of the oldest fallacies in economics is that, by setting a price ceiling, things will become more affordable.
Sure, for certain people, an artificially low price will help. However, for the vast majority of low-to-middle income people seeking to rent, things will only get worse.
Here is a little economics lesson for Bernie:
By placing a limit on how much a developer or landlord can charge for rent, you make it less financially viable for them, which causes them to provide less housing, which makes for less housing, not more.
The very people that rent-control is supposed to help are the ones that suffer the most.
In 1994, San Francisco passed a rent-control ordinance that prohibited landlords from raising rent above half the rate of inflation. That worked out to about 1% a year.
What happened next was predictable: supply of rental units declined.
Landlords began moving away from rental properties and started selling their apartments as condos. Some also bulldozed their buildings and built new apartments, because the law only applied to existing units.
Stanford economist Rebecca Diamond estimates that rent control reduced the supply of rental properties by 25%.
This policy had the effect of harming low-income people, the very people the liberal policies were supposed to help.
Rent control is in effect in large liberal cities, including New York City, Washington, D.C., Los Angeles and San Francisco.
New York City and San Francisco are the most expensive cities to rent in. In San Francisco, the average rental cost is $3,500 a month. In Manhattan, the average price of an apartment is $3,650 a month.
Liberal California and New York have 19 of the top 20 most expensive towns/cities in the country.
The reasons for this should be obvious by now, but Senator Sanders continues to perpetuate the myth that rent control will help the lower income bracket.
Time and time again, this policy has been debunked, and yet it just won’t die. Just because something sounds nice in theory doesn’t mean it will work in practice.
Economic success requires good incentives. By allowing the market to operate freely, consumers benefit. When government tries to dictate how much can be produced and at what price, things usually go very badly.
Housing supply is yet another example of government control making things worse for everyday citizens.
When the government decreases the marginal revenue available to produces artificially, it makes it less attractive to produce more of that good, so less is produced overall and consumers suffer as a result.
This is Economics 101. Bernie needs to read a basic economics textbook.
The road to hell is paved with good intentions.