How to Get Rid of Rent Control

February 2, 1947

The politicians insist that this country needs most of all new and better rental housing. To encourage this, they penalize and punish most of all precisely the people who have supplied us with the rental housing we already have. Rents are today only 15 percent above the 1935–39 level, though clothing is 90 percent above and food 103 percent above. All items together average 65 percent above. Compared with the increase of 15 percent in rents, average weekly wages of factory workers have increased 127 percent. In short, the average worker’s rent is a smaller percentage of his income than ever before. Yet President Truman recently called the rent rise an “intolerable strain” on family budgets. And if Washington seems agreed upon any one thing, it is that rent control must be extended unimpaired.

The defense offered for rent control is that the supply of housing is “inelastic,” and that higher rents, except those permitted on new housing, do nothing to encourage the construction of new housing. (Though we were once insane enough to put rent ceilings even on housing not yet built.) This defense overlooks the fact that compulsory low rents on old housing do two things. They encourage wasteful use of space by tenants already in possession, and so intensify the housing shortage for people unlucky enough to be caught outside. And they remove both the incentives and the funds to improve old houses or even to keep them in repair.

The classic illustration of these consequences today is in France. France has now had rent control for 33 years. Tenants in France now pay from 5 percent down to as little as 1 percent of their annual incomes for rent. The result is that houses in France are in a wretched state of disrepair and decay, inside and out. And their condition steadily grows worse. It is true that newly built houses are not subject to rent control. But builders no longer trust the government not to change its mind about that after the houses are up.

Moreover, though rents in France average only five times as high as in 1914, building costs are 65 times as high. New buildings, therefore, would have to rent for something like ten times the rent of old buildings. A public habituated to ridiculously low rents would resent this as an outrage. So the new houses are not built.

The longer rent control is retained, the greater its problems become; and the greater the problem of ever getting rid of it. How can we keep ourselves from going the way of France?

This is a political problem. Congress is now certain to extend rent controls. When it does it should at least provide that on and after March 1 any state in the union, or even any home-ruled town or city, will be permitted to take over rent control from the Federal government at its own request. That would relieve Congress from a frightful future headache. More importantly, for those to whom such things still matter, it is the only constitutional thing to do. There is not in the American Constitution a single clause that could possibly be interpreted to give the Federal government the right to regulate rents in peacetime. If rents are not essentially local, nothing on earth is local. Houses and apartments don’t wander across state lines.

To discourage individual states and cities from keeping rent control indefinitely, as in France, Congress might provide or recommend that any community taking over rent control should taper it off in not more than five years under some such formula as this: In 1949 it should allow rents to be raised at least 20 percent as much above the 1941 level as all other items on the official consumers’ price index had gone up as of Sept. 15 of this year; in 1950 it should allow rents to go up 40 percent as much as other items; in 1951, 60 percent as much; in 1952, 80 percent as much, and in 1953 just as much, with a termination of rent control thereafter.

This, of course, for five years would be obviously unfair to landlords as compared with other producers or sellers, but not as unfair as retention of the present system. And it would get us back to free rents at least eventually, on a definite schedule, and with a minimum jolt to tenants.