Rent Control Is Harmful

Just as minimum wage laws tend to reduce employment transactions with those who pay is most affected, so rent control laws have been followed by housing shortages in Cairo, Melbourne, Hanoi, Paris, New York and numerous other places around the world.  Here again, attempts to make transactions terms better for one party usually lead the other party to make fewer transactions.  Builders especially react to rent control laws by building fewer apartment buildings and, in some cases, building none at all for years on end.

Landlords may continue to rent existing apartments but often they cut back on ancillary services such as painting, repairs, heat and hot water — all of which cost money and all of which are less necessary to maintain at previous levels to attract and keep tenants, once there is a housing shortage.  The net result is that apartment buildings that receive less maintenance deteriorate faster and wear out, without adequate numbers of replacements being built.  In Cairo, for example, this process led to families having to double up in quarters designed for only one family.  The ultimate irony is that such laws can also lead to higher rents on average — New York and San Francisco being classic examples — when luxury housing is exempted from rent control, causing resources to be diverted to building precisely that kind of housing.”

Thomas Sowell, Intellectuals and Society, p.70-71