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The Real Cost of Rent Control

From a poignant article published today on MarketWatch.com, "A new report adds to the growing literature concerning the effects of rent control."

A new working paper on the subject, released this past December, illustrates the damaging and expensive effects of a successful 1994 ballot initiative in San Francisco that implemented rent control protections for small multifamily buildings erected before 1980.

According to the report, the rental supply in San Francisco consequently dropped by 6 percent following the expansion of rent control. 

Additional findings show that landlords were 10 percent more likely to convert their buildings into condominiums if they were subjected to rent control. 

Further, rents were discovered to have increased by at least 5.1 percent as a result, amounting to greater than $2.9 billion of total rent increases passed onto tenants across the city. 

Roughly half of this financial burden is shown to have been shouldered by residents who had moved to San Francisco following the establishment of rent control. 



The reason that rent control and so-called "affordable housing" measures are so popular is precisely because of the perceived political benefits attending the announcement of such visions along the campaign trail. 

These conversations also tend to obfuscate the real issues surrounding emerging housing crises across densely-populated metropolises in the United States.

The forces responsible for this housing crunch are nearly as simple as an exponential influx of workers crossed with an artificially-constrained supply of housing.

And this is surely a matter of national significance, as pernicious downzoning legislation, vertical restrictions on development, a bloated subsidized housing space, and prohibitively low issuance of building permits have all combined to yield an all-time high in national rental income as a share of gross domestic product.

Oddly, it appears that there are a number of political initiatives which stand at odds against each other, even within the same party or ideological vein.

As it turns out, a particular cohort champions the notions of "ending homelessness" and aiding the poor while simultaneously willfully choking the supply side by restricting issuance of building permits, preventing lands from being developed, and preserving aesthetically-pleasing views for high society by prohibiting developments beyond specified heights. 

And while this cohort opposes any such supply surge to offset the climbing demand, its demagogues charge that demand side by the order of housing vouchers and artificial standards, the total of which achieves nothing in the way of reconciling the supply-demand imbalance.

In fact, these policies effectually achieve much of the converse, automatically eliminating bids from otherwise-suitable applicants who simply earn too much, or in many cases earn too little of their own might, to compete with the underreported privilege of being labeled "poor" in twenty-first century America. 

In these cases, veritable units are occupied by unemployed and largely-unmotivated tenants at the direct expense of working persons striving to earn a living, and doing so with the residual benefit of produced value-add in the marketplace.

And while this more average or normal story remains unlikely to displace the gut-wrenching fiction about the down-and-out indigent, both are human beings, yet the primary and unmeasurable difference between them is one's determination to thrive while the other casually survives, often with an attitude of entitlement and an abrasive arrogance for achieving all of this without any of the work.   

Many denizens of these particular locales even devoutly espouse beliefs that their hometowns ought to be altogether shielded from migrants, a philosophy which miraculously, or rather ironically, coexists with an attitude of distaste for anything of its semblance at the national level. 

Much akin to children arguing on the basis of "I was here first," the conventional wisdom of the self-defeating Left pathetically attempts to rebrand something so overtly juvenile that a Fisher Price label would only render it more serious.

And the story only continues from here.

One of the oft-unmeasured benefits of deregulated housing markets is the graduated investment of both residents and landlords, especially within increasingly competitive domains, in the maintenance of their respective reputations and properties, along with sustainable, forward-looking and compatible lifestyles.

The long-run conditions of rent-controlled properties, and the perils of crime which accompany their decline, are often ignored by the poetic politician who instead hoists up these examples as illustrations of the failures of business and still further cause for expanded government involvement.

In the San Francisco Bay Area, for example, unscrupulous tenants exploit affordable and subsidized housing by inviting unauthorized guests to stay with them, by subletting their units, and by arranging their funds to maximize their benefits and obscure their earnings (if they are working at all).

What's more, many of those beneficiaries own brand new vehicles, flat-screen televisions and simply lack the motivation or creativity to pursue a life of self-sovereignty.

And how could these rational people possibly be expected to decline such a cozy, predictable lifestyle?

After all, the new American way has created such a lucrative opportunity out of it that it would be nearly preposterous to reject it.

Unfortunately, this form of social engineering has yielded an array of nuanced costs beyond those associated with an anemic, underperforming and increasingly-disappearing workforce. 

Many of these program participants consort with sordid casts of characters, welcoming them onto properties and gated communities for extended stays, putting innocent neighbors and children at heightened risk and exposing a concentrated segment of America's youth to non-viable irresponsible personalities which are rendered sustainable only by a relatively-discreet matriarchal system, where overbearing emotions obscure reason at the expense of absolute freedom: the capacity to flourish or fail of one's own exertion.

And while it had been all along the forces of government which deliberately undermined the organic propensity of the market to instead promote the remote and personal initiatives of a myopic disposition, the thematic result of emotionally-supercharged policymaking absent objective reasoning has regrettably become par for the course.

Yet whereas the mistakes and misgivings of faulty government boondoggles were once limited in their reach and in the depths of their influence, they have become nearly ubiquitous today.

And their scope will presumably only continue to expand, with personal sovereignty and individual responsibility waning from the rear-view mirror as the political machine veers straight toward absolute power. 

As the famed Lord Acton once wrote in his letter to an Anglican bishop, "Power tends to corrupt and absolute power corrupts absolutely."

In terms of the housing market, the case appears no different.

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