Cutting the supply of housing increases homelessness. But radical Chicago Mayor Brandon Johnson is backing policies that will shrink the supply of housing in his city. His office is now calling for rent control, even though economists say rent control shrinks the quantity and quality of housing.
The Mayor’s office also wants to curb production of high-value properties that only well-to-do people can afford to live in. That would indirectly reduce the amount of housing available to poor people, because when well-to-do people move into high-value properties, that triggers a chain reaction that frees up more housing for poor people. (It works like this: When rich people move in to high-value homes from other homes, that frees up their old homes for middle class people to live in. As a result, those middle class people move out of their old homes, some of which become available for the poor to live in, rather than being homeless. Thus, ordinary people benefit even when high-value housing is constructed, as housing experts have noted — even those who are progressive-leaning, like Ned Resnikoff and Brian Hanlon)
Almost all economists think rent control is a bad idea: In a 1992 poll, 93 percent of them agreed that rent control reduces the quantity and quality of housing available. Reason Magazine notes that “rent control has a history of constricting the supply of rental housing and reducing housing quality.” As the Wall Street Journal observes, “If there’s any consensus in economics, it’s that rent control achieves the opposite of its intended goal. It leads to housing shortages by discouraging new development and maintenance of existing properties.”
The Washington Examiner reports:
Last week, a transition team convened by new Chicago Mayor Brandon Johnson released a 223-page transition report titled “A Blueprint for Creating a More Just and Vibrant City for All.” Needless to say, it is a train wreck.
I have previously explained how its section on public safety would do nothing but exacerbate Chicago’s crime problem. But that is far from the only terrible section of the report. The housing plan it laid out is also particularly bad.
Rather than addressing high housing costs through incentivizing the construction of new housing —which would raise supply, thus lowering prices and making housing more accessible — it outlines a top-down scheme that will inevitably worsen the city’s housing environment.
Some of the recommendations include: Raising taxes on high-value properties, ensuring no homeless person will ever be asked to leave a location unless permanent housing is available…instituting rent stabilization (ie. rent control), prohibiting “discrimination” on the basis of criminal history, and performing multiple “racial impact assessments.”…
rent control — cannot be the centerpiece of a workable and effective housing policy plan….significant research shows that rent control disincentivizes the construction of new housing, which creates housing shortages and actually ends up causing prices to rise. A real-world example: In the six months after St. Paul, Minnesota passed a rent “stabilization” ordinance in 2021, permits for new housing projects declined by 84% — from 2,180 permits down to 352 — relative to the same period during the prior year. It got so bad that the city council ended up repealing the most important parts of the ordinance only a few months after it went into effect….both individual studies, as well as sweeping literature reviews, show that rent control is an imprudent policy.
Imposing rent control will harm Chicago’s municipal well-being by reducing the value of housing. By cutting the value of housing stock, rent control reduces the property tax revenue that funds schools and local governments. “Researchers at the University of Southern California said rent control hurt property values in St. Paul, Minn. by $1.6 billion,” reported Market Watch.
As the liberal Brookings Institution notes, “Rent control can also lead to decay of the rental housing stock; landlords may not invest in maintenance because they can’t recoup these investment by raising rents.” Rent control also results in some housing being largely empty, and other housing being crowded as a result, it says:
Rent control can also lead to “mis-match” between tenants and rental units. Once a tenant has secured a rent-controlled apartment, he may not choose to move in the future and give up his rent control, even if his housing needs change…This mis-allocation can lead to empty-nest households living in family-sized apartments and young families crammed into small studios.
