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Rent Control

6 min read

Part of Housing and land.

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Every episode (5)

Who argued it

Christian Britschgi · Art Carden · Trevor Burrus · Randal O’Toole

Property Rights · Housing Policy · Zoning · Economics · Minimum Wage · Free Markets · Constitutional Law · Urban Planning

Background

Rent control is a set of local regulations that limit what landlords may charge for rental units. On The Bob Zadek Show, Trevor Burrus, described as a research fellow at the Cato Institute’s Robert A. Levy Center for Constitutional Studies and editor-in-chief of the Cato Supreme Court Review, characterized it as a price ceiling: a formula keeping rent below the level it would reach in a market. Burrus said the form varies by locality, with New York City’s laws among the most famous and onerous, and described rules governing which units are covered and how much a rent control board may allow costs to rise—for example, a cap of roughly two percent a year. Escaping the Statrix: Trevor Burrus’s Rent Control Red Pill (2021)

The economics of a price ceiling

Burrus said a price ceiling does two things: it makes people consume more of the product than they would at a higher price, and it makes suppliers produce less. Landlords have less incentive to build rental properties and less incentive to maintain them, so housing stock is taken out of the market as it becomes dilapidated. He offered the example of two struggling actors in New York City who share a one-room flat while waiting tables; if rent control caps the unit at $700 a month, each may decide to get a separate place, so two people occupy two units. He cited an economist’s remark that short of bombing, rent control is one of the best ways to destroy a city’s housing stock, and noted that in the 1970s Sweden built houses faster than any country had ever built yet still had a housing shortage because people took up too much housing under the artificial price ceiling. Escaping the Statrix: Trevor Burrus’s Rent Control Red Pill (2021)

Mike Munger made the same point in a later episode, saying there is a shortage of housing in San Francisco because of rent control and that New York has a terrible shortage of housing because of rent control. He argued it is literally impossible to run out of anything as long as the price mechanism is free to adjust, and that when the price mechanism is prevented from adjusting, shortages appear. The ‘Broken Window Fallacy’ is Back (2023)

Emergency origins and the courts

Bob Zadek said rent control took off in the New York metropolitan area at the end of World War II, when returning GIs wanted to start families and created sudden demand for housing, and that New York City enacted emergency legislation to get over the hump. He noted the emergency outlived most of those GIs. Burrus said the first real rent control laws came in World War I, and that the Supreme Court heard a challenge in 1921 in Block v. Hirsh, which narrowly scraped by a constitutional challenge. A few years later, he said, the case came back to the Supreme Court, which ruled the emergency had expired and struck down those laws—one of the only times the Court has said that if you claim an emergency, it has to actually be an emergency. He added that New York City reauthorizes its emergency about every three years. Escaping the Statrix: Trevor Burrus’s Rent Control Red Pill (2021)

Wealth transfer and the Takings Clause

Zadek framed rent control as a wealth transfer from the owner of real property to the renter, a statute saying A must transfer value to B, and compared it to state price gouging statutes. Burrus tied this to the Takings Clause, which he said provides that private property cannot be taken except for public use and with just compensation. He described the clause’s purpose as stopping politicians from claiming a collective public benefit while making a single landowner—“Dan the landowner”—subsidize it, and said Justice Scalia at one point said the purpose of the Takings Clause is to not put the onus on one person or one group of landowners that everyone is supposed to bear together. Escaping the Statrix: Trevor Burrus’s Rent Control Red Pill (2021)

Who benefits

Burrus said that if you get a rent-controlled apartment you absolutely benefit, which makes the laws hard to repeal: perhaps 500,000 people in New York hold rent-controlled apartments and are very interested in keeping them. He called it a concentrated benefits, diffused cost question, and noted the New York joke about scanning obituaries for someone who died in a rent-controlled apartment paying 1950 rent. He compared it to minimum wage: beneficiaries are visible, while those who cannot get an apartment are not. The most sensible case for rent control, he said, rests on unequal bargaining power presumed between landlords and tenants, since moving is difficult. Zadek challenged that premise, arguing there is never equal bargaining power in ordinary transactions and that a landlord charging above market will have no takers. Burrus added that rent control has no means test and distributes apartments by time and luckiness, like a lottery, rather than by need or merit, unlike federal housing subsidies and vouchers that go to people who demonstrate need. Escaping the Statrix: Trevor Burrus’s Rent Control Red Pill (2021)

Across episodes:

Two episodes touch the topic: the March 2021 conversation with Trevor Burrus and the January 2023 conversation with Mike Munger. The episodes show no development—Munger restates the shortage argument Burrus had already made, and neither responds to the other.

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