They lead to a slowdown in construction and a deterioration in supply hurting future tenants
Many housing advocates champion rent controls as a panacea for rising rents, but a wealth of empirical evidence indicates that while such controls may offer temporary respite to current tenants of controlled units, they invariably inflict long-term damage on future renters.
This is because landlords grappling with rents that don’t cover improvement costs often neglect maintenance, leading to a decline in housing quality. This neglect is not just a theoretical possibility, but a real-life consequence of rent controls. More importantly, rent controls discourage new construction by dampening investor enthusiasm since they fear future revenue limitations.
Yet a recent op-ed by Ricardo Tranjan, an economist at the Canadian Centre for Policy Alternatives, argued that rent controls “don’t reduce housing supply but they do limit profits.” The author cited several studies from Canada and the United States to argue that rent controls “stabilize rent increases without negative effects” and advocated for “bringing back rent control in units built after 2018” in Ontario.
We reviewed the studies cited by the author and found they all unequivocally demonstrated that rent controls contribute to a slowdown in rental supply, thus hurting the very people that rental advocates intend to help. …[Continue Reading]