Left vs. Fact: Rent Control Hurts Renters | Short Clips

[Music] this just in the California said it has voted to approve a bill that would cap rent increases for most tenants across the state if the new bill would protect an additional 8 million California renters and today governor Newsom called the new legislation the strongest rent control package in America now governor Newsom has sent he will sign the bill in this final week of the legislative year the bill would go into effect on January 1st of next year there's no hot button issue hotter than rent control even the most courageous politician quakes at the idea of hosing it's for starters no one likes landlords second those who benefit from rent control and there are a lot of them votes and it has huge emotional appeal imagine this six o'clock news story a reporter interviews a senior citizen describing how she'll have to vacate her small apartments her home for 25 years if her rent control isn't maintained what politician wants to go up against that these are just a few of the reasons why once the city adopts rent control it's almost impossible to dislodge it but does rent control work does it lower or raise housing costs and does it increase the building of more affordable housing it might surprise you to know that nearly all economists on the right and the left from the late Milton Friedman to Paul Krugman agree that the answer is no in a survey of 464 economists in the May 1992 issue of American Economic Review 93% said that a ceiling on rents reduces the quantity and quality of housing available why the unanimity because it's an accepted economic principle the government imposed price controls and that's what rent control is always lead to price distortions in this case rents this applies everywhere but let's focus on New York City the place where I have concentrated my research New York has the biggest rental market in the country of the city's 8.2 million residents 5 and 1/2 million rents and these five and a half million renters live in about 2.2 million apartments or rented houses every year a city board votes on how much owners of rent regulated apartments will be able to charge their tenants for the following years one year or two year leases the board members base their decisions not on supply and demand but on an estimate of how much costs such as fuel and insurance have risen and of course how much of an increase voters will tolerate think about what this means the longer you stay in your apartments the more you benefit from below market rents or to put it another way why would you ever leave your rent controlled apartment the late screenwriter Nora Ephron once noted with some satisfaction that she moved into a five bedroom apartment on the Upper West Side in 1980 and stayed there for 24 years paying 1/3 the true market rent the well-off who benefit from great rents have the resources in part from the money they've saved on rents to make their own improvements to their units paint redecorate and so on but what about the majority of renters who have much less money they're not so lucky because landlords can't afford to improve or even maintain their rent-controlled apartments since they can't raise rents to market levels they can only make a profit by keeping their costs to an absolute minimum and there's another reason landlords have little incentive to maintain rent-controlled apartments they have no fear that their renters will move out and if they do there's always a long line of people waiting to move in and consider one more unintended consequence of rent control why would investors build new apartments for anyone but the very wealthy in a city where rents are controlled the answer of course is that they rarely do the vast majority of new residential construction in New York is geared to the wealthy who can pay rents above the controls limit or who are willing to buy their apartments outright as condos or coops these expensive units are well beyond the reach of the middle-class let alone those lower on the economic stratum in some rent control one hurts the people it's supposed to help to give landlords little incentive to improve their housing stock three discourages construction of new housing for all but the rich and the voters love it so rather than dream of the day when New York or Los Angeles and other rent control cities might abandon the self-destructive urban policy maybe we should see this as a cautionary tale that well illustrates a valuable maxim be wary of government programs bearing gifts like the famous horse that destroyed an ancient city they come with all sorts of problems I'm Nicole Gelinas a senior fellow at the Manhattan Institute for Prager University thank you for watching this video to help keep Prager u videos free please consider making a tax-deductible donation you