The phrase and its critics
In a June 2019 episode, host Bob Zadek framed the “housing shortage” as one of the “wrongheaded principles underlying rent control,” calling the phrase one that appears “in the news every day” and asking guest Charlie Deist to define it. Zadek maintained that “there never can be” a housing shortage and that it is “impossible for there to be, intellectually, a housing shortage.” The Rent Control Bomb (2019)
Deist offered the economist’s diagram: upward-sloping supply and downward-sloping demand, with rent control acting as a price ceiling drawn below the intersection, so that the capped price intersects demand at a lower quantity than it intersects supply. Pressed for the non-wonkish answer, Deist said that when quantity demanded exceeds quantity supplied by the market, and when landlords are not allowed to raise rent to incentivize new development, one can speak of a shortage—while noting that people and landlords are creative in finding ways around rent control, citing New York City landlords who charged key fees of 2,000 dollars to change the keys for a new tenant. The Rent Control Bomb (2019)
Zadek rejected the framing. He argued that a housing shortage would mean that not everyone who wants to live in San Francisco can, irrespective of price—so that until the city could accommodate 75 million people there would be a shortage—and that by that logic there is also a severe diamond shortage and a shortage of expensive cars and designer clothing. He concluded that there is never a housing shortage, only a shortage of housing at a price somebody feels they want to or can pay, and that “housing shortage” is a placeholder or surrogate for “cheap stuff.” The Rent Control Bomb (2019)
Rent control, supply and conversion
In a March 2021 episode, Zadek returned to the theme, calling the alleged shortage of affordable housing the core source of the problem and saying he hated the phrase. He argued that rent control has the opposite effect from the one intended: it prevents houses from being built, since no one would build rental property when limited in what they can charge and with no incentive to improve. He asked guest Trevor Burrus about the conversion of rental property to cooperative or condominium housing. Escaping the Statrix: Trevor Burrus’s Rent Control Red Pill (2021)
Burrus described lawmakers who believe “magic words can solve problems”—passing an Affordable Care Act when health care is not affordable, or an Affordable Rent Act when rent is not affordable—and then passing further laws when landlords respond to the incentives. He compared the pattern to the nursery rhyme “There Was an Old Lady Who Swallowed a Fly,” in which each new law band-aids the effects of the last. He said New York has a law requiring that 51% of existing tenants vote before a conversion, empowering tenants to determine how a landlord can use their property, and that a case called Pactel was being filed that week at the cert stage at the Supreme Court, challenging a San Francisco ordinance requiring that landlords who turn apartment buildings into condominiums offer existing tenants essentially a lifetime rental contract. Escaping the Statrix: Trevor Burrus’s Rent Control Red Pill (2021)
Shortage, scarcity and price
In the 2021 episode, Zadek asked what “housing shortage” means in everyday conversation. Burrus answered that colloquially it means people are not getting as much as they want at the price they can afford, and distinguished scarcity—things inherently scarce, like platinum, plutonium or diamonds—from shortage in the economic sense, a combination of a price and supply that can occur when government meddles with the price, creates artificially high demand and restricts supply. He said rent control creates an economic shortage by messing up demand and supply. Escaping the Statrix: Trevor Burrus’s Rent Control Red Pill (2021)
Zadek again insisted there is never a shortage: if price were no object, anyone who wanted a precious metal or an apartment in Manhattan would get it, so the shortage is never of the number of units available but only of price. He said people have no inherent right to be able to buy anything, and that the fact many people cannot afford to live in Manhattan at market rents does not mean there is a shortage. If the problem is only price, he said, the one sensible cure is to increase supply, and the price will go down. Escaping the Statrix: Trevor Burrus’s Rent Control Red Pill (2021)
Burrus said he was saying the same thing but wanted to be clear that economists believe in shortages because there are such things. He offered the example of Lamborghinis: at 500,000 dollars, people who want one at that price buy one, so there is no shortage; but if government said you cannot charge more than 200,000 dollars, more people would want to buy and Lamborghini would sell fewer, and the gap at the mandated price is a shortage. Zadek agreed, adding that it is caused by messing around with the price, and compared it to California water: there is no shortage of water, only a shortage of free water. Escaping the Statrix: Trevor Burrus’s Rent Control Red Pill (2021)
Rent control as a wealth transfer and a taking
In the 2021 episode, Zadek characterized rent control as a wealth transfer from landlords to tenants, and said the tenant who benefits is not necessarily a needy tenant but a random tenant who happens to be at the right place at the right time or has political clout or savvy in the marketplace. He said government can generously give a benefit to the tenant without raising broad-based taxes, because it raises a specific tax on the landlord to benefit a tenant, and called it offensive that the mere fact of owning an apartment building means the owner must bear the burden of a wealth transfer to a tenant the landlord has never met. Escaping the Statrix: Trevor Burrus’s Rent Control Red Pill (2021)
Zadek said the Constitution prohibits government from taking property except with just compensation and for a public purpose, and that the Kelo case, though decided the wrong way, and its aftermath—the little yellow house in Connecticut—taught that the Takings Clause cannot be used to transfer property merely from one private actor to another. He asked Burrus to explain the difference between an absolute taking, which is eminent domain, and what has come to be called the regulatory taking, which more applies to rent control. Escaping the Statrix: Trevor Burrus’s Rent Control Red Pill (2021)
Burrus said the Fifth Amendment implies that private property can be taken if there is a public use and just compensation is given, and that the Framers were extremely concerned with how political actors could misuse their power, a type of corruption; he cited James Madison and the Philadelphia convention, and said the Takings Clause fits the rubric that without a compensation requirement government has every incentive to misbehave. He described the classic example of a house in the middle of a highway, park or new development, and said that is what happened to Susette Kelo—it was a pink house—in the Kelo v. City of New London case, where everyone in the neighborhood had their houses taken and torn down. Escaping the Statrix: Trevor Burrus’s Rent Control Red Pill (2021)
Burrus described the other type of taking as government putting so many regulations on property that they essentially destroy all economic use of it, or allow someone, such as a tenant, to occupy the property at a lower rent than the owner would want. He said if government passed a law that anyone can go into your home at any time, that would be a taking, and if you have to let someone live in your house, they took your room even though you still have the whole house. He said the difficulty is using complex formulas to weigh rules together, since some rules raise the price of property and some lower it, and there is a complex Supreme Court jurisprudence on the question. Escaping the Statrix: Trevor Burrus’s Rent Control Red Pill (2021)
Burrus said challenges working their way up in the Second Circuit allege both a regulatory taking—that the laws diminish the value of property in a way requiring just compensation—and an actual taking, because the property is being occupied and someone is forced to rent to someone they do not want to rent to. He said the Second Circuit was getting ready to hear this, that it cruised through the district court, and that the test being pushed at the Supreme Court and elsewhere is that if government makes someone occupy your land, that is just a taking. Escaping the Statrix: Trevor Burrus’s Rent Control Red Pill (2021)
Across episodes
The topic is treated in The Rent Control Bomb (2019) and Escaping the Statrix: Trevor Burrus’s Rent Control Red Pill (2021). The 2019 exchange with Charlie Deist works through the supply-and-demand diagram and the definition of the phrase; the 2021 exchange with Trevor Burrus repeats the definitional argument and adds the distinction between scarcity and shortage, the Lamborghini and California water illustrations, and the takings litigation. The excerpts show no development in the underlying position: Zadek advances the same claim in both episodes, and in 2021 Burrus both agrees and insists that economists recognize real shortages created by price meddling.
What the sources do not cover
The excerpts do not state the outcome of the Second Circuit litigation or of the Pactel cert petition, nor do they identify the statutes or ordinances at issue beyond the New York tenant-vote requirement and the San Francisco condominium-conversion ordinance. They do not give the date of the Kelo decision or the amendment’s text beyond Burrus’s paraphrase. No empirical housing data, vacancy rates or rent levels are provided, and the excerpts break off before the 2019 discussion of AB 1482 and recent legislation.