Perverse Logic of Rent Control

-edited

Everywhere rent control has been tried, it's been a failure. Nonetheless, Illinois politicians want their turn.

Rent control and housing shortages go hand in hand. Why build if the government gets to set prices for you?

Mark Glennon at Wirepoints hits the nail squarely with his piece Rent Control Would Intensify Housing Crisis.

A Chicago Democratic lawmaker's second attempt at eliminating Illinois' rent-control ban would predictably worsen the state's housing crisis – or solve it in a negative way – the founder of an online news outlet said during a recent interview.

"If you want to see the supply of housing plummet, pass rent control laws," Wirepoints founder and executive editor Mark Glennon said in an email interview with Chicago City Wire. "Ironically, maybe there's some perverted logic to that. We won't be needing much housing in Illinois if crazy ideas like this continue to drive people out of Illinois."

Glennon's comments followed Rep. Will Guzzardi's (D-Chicago) introduction last month of House Bill 255 to repeal the the Illinois Rent Control Preemption Act of 1997. As its name implies, the state's rent-control ban bars the state's municipalities from enacting laws to control rent on residential or commercial property.

Why Not?

Illinois is so totally screwed already. Why not let socialists put on the finishing touches?

Mike "Mish" Shedlock

Comments (30)
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truthseeker
truthseeker

I remember years ago maybe the 70’s even the 80’s when in some of the bigger cities when rents went up for the poorest who were working really hard, this is where the churches and other civic organizations would step in to help these people as long as they could while the businesses or the people who were employing these people were made aware of this and in many cases would increase their wages to help them pay the increase in their rent. This is the way America used to operate believe it or not! Now we see many of these mega churches with tax free money going out and buying another Jet! Many churches still try to help out with some kind of ministry I think, so we still have some very wonderful people who still are trying to help.

stillCJ
stillCJ

Editor

I lived in Illinois for a long time (too long) but I always figured eventually the voters would get tired of the stupidity and corruption of Illinois politics and straighten it out. I finally realized that (for reasons I still do not understand) Illinois voters would never get smart, so I gave up and left the state. That day was one of the happiest days of my life.

Greggg
Greggg

Casual_Observer
Casual_Observer

Until prices are allowed to decline relative to income and tax receipts nothing will change.

On the bright side, California ruled against some pension holders and left open the possibility of reducing pensions under other clauses.

KidHorn
KidHorn

Not to mention landlords are discouraged from maintaining their properties. They want existing tenants out so they can sell the apartments as condos instead of enticing them to stay.

My mom was a slumlord in Washington DC. Not only were rents controlled, but the tenants wouldn't pay the rent and then would rip the smoke detectors out and call the fire department. My mom couldn't charge rent until the units were up to code. She tried going to court, but was the wrong demographic to have any chance of winning. As people moved out, she didn't rent the units. Instead she converted them to condos and sold them.

Carlos_
Carlos_

Mish so you think that if rent is left to the markets then supply will fall because of "more supply". The problem is that supply is not elastic. In other words construction is always constrained. If workers can't afford to rent then you get homeless workers. Don't think the solution is rent control but is not free markets either because like I said supply is constraint.

St. Funogas
St. Funogas

"Illinois is so totally screwed already. Why not let socialists put on the finishing touches?"

Amen, Brother Mish. The entertainment value goes way up every time a new socialist gets elected in Chicago, or when the old ones want to try another insane idea destined for failure.

I spent five years in Shitcago, then walked into my boss's office one day and told him I'd take a 50% cut in pay if he'd let me work from home from anywhere but Illinois. He said no problem. I googled George Mason University's State Freedom Index and a few months later was living somewhere so cheap I didn't even notice the cut in pay. I was renting a ghetto apartment in Chicago for $1,100/month. In my new location, I paid $325/month for a house on a lake while building my dream house and shop on 20 acres. The only rent controls here are old school: supply and demand. No zoning laws, no building codes, no permits, no inspectors, no bullshit. I have to pay $23/month in property taxes, but there's no escaping that anywhere.

The view is great from here: watching Shitcago and the rest Illinois implode. Keep the excellent commentary coming Mish!

RonJ
RonJ

"Illinois is so totally screwed already. Why not let socialists put on the finishing touches?"

Apparently, that is what it needed for a Chicago tax revolt. France got to taxes being 46% of GDP, when a Paris Accord fuel tax was the straw which broke the tax payers back.

Carlos_
Carlos_

"No zoning laws, no building codes, no permits, no inspectors, no bullshit. I have to pay $23/month in property taxes, but there's no escaping that anywhere."

That will allow anyone to build a dump next to your property. Wouldn't you love it

WildBull
WildBull

Carlos, Mish thinks that if housing were left to the market, supply would grow and costs would remain affordable. After rent controls, no one will build because it will be impossible to make money. In that case, maybe the city elders should consider building nice gray poured concrete buildings like those now abandoned in Warsaw.

themonosynaptic
themonosynaptic

Housing is a fd market. In SF there is onlt rent control in parts of the downtown - that parts where all the fwits point to and say "yuck isn't SF horrible". The same fwits whine about the fact that a one bedroom appt costs $4k/month or more.

House/Rent prices are more a reflection of the quality/speed/cost of transportation than availability of housing stock and too many people denigrate high quality, high speed public transport.

ReadyKilowatt
ReadyKilowatt

The other side of rent control is that it frees up uncontrolled units to charge whatever they wish. In Aspen Colorado they have very strict rules for low income housing, but they aren't at all interested in increasing supply because that might have a negative effect on all the investment/vacation homes, many of which sit empty for most of the year. Many of these homes are sited on enough land to build a multi-family building, but because it might detract from the "charm" of the city they are strictly verboten from making any changes. Of course the real reason is because the neighborhood might evolve, and the last thing you want when you have a $10 million investment is any sort of risk.

Advancingtime
Advancingtime

Several trends point to the reality we should expect rents to edge higher in the future. While many economy watchers tout the line any economic crisis will result in massive defaults and deflation hidden forces may prove them very wrong. Over the last few decades, a great amount of wealth flowing into paper promises rather than tangible assets has masked true inflation but it is everywhere. One place it is most obvious is apparent in the replacement cost of buildings and infrastructure destroyed or damaged by natures fury.

Valzape
Valzape

Thats is actually not true. Here in Sweden we have both; rent control for govermental housing ( some people choose to rent even if they can buy) and you can purchase your flat ( but if you rent it out you cant charge market value only cover your costs plus 30% on top of that). Rent control has worked pretty well the only thing that happen was that the politicians ( shortsighteed as bankers are risk averse when they get a fat bonus) did not investing in new housing since 1980 that let to a shortage of housing. The execution of the plan was bad. But it does work. Reg from Sweden