Rent Control Forever?

April 3, 1950

Every year since the end of the war the Administration has asked for the extension of rent control “just for one year more.” There is no reason, as I hinted in this place last year (Newsweek, March 14, 1949), why this could not go on forever. For the Administration wants rent control extended “until the supply of housing has caught up with the demand.” But “supply” and “demand” are meaningless except in relation to a price. It is rent control itself that keeps supply from catching up with demand. It perpetuates the very problem it pretends to solve.

Rents are out of line with all the rest of the price structure. Weekly factory wages are now 151 percent above the 1935–39 level. Rents are up only 23 percent. The cost of living is 67 percent higher than in 1935–39. Clothing is 85 percent higher; food prices 96 percent higher. Less than 13 percent of wage earners’ spending went for housing in 1949, compared with more than 18 percent in 1935–39. Since 1939, the cost of building has increased between 100 and 140 percent.

Statistics do not indicate a real overall housing shortage. The Census Bureau found that there were both fewer persons per occupied dwelling unit and more rooms per unit in 1947 than in 1940. But rent control itself has brought about the appearance of a housing shortage. For it encourages tenants already in possession to use space wastefully at low rents. And it intensifies the problem for people unlucky enough to be caught without a roof, forcing them to bid high for the little space open to them.

The best solution is to let Federal rent control lapse on June 30. This, no doubt, has drawbacks. In some states and cities it would bring tenants back to economic reality with a sudden jolt. In other states and cities the local politicians are already taking over rent control on the purely demagogic principle that tenants have more votes than landlords, and are entitled to occupy their present quarters at prewar rents indefinitely—no matter how much their own incomes have gone up in the last ten years or so.

One possible political compromise, if there should be any extension of Federal rent control, would be to permit landlords in the next three years to raise rents by no more than 15 percent a year, and to provide for automatic decontrol thereafter.

One might playfully imagine another compromise, which might provide a more rapid economic education than any other. Prohibit the landlord from raising any rent whatever on his own initiative, but when a lease expires allow him like an auctioneer to accept the highest bid. Then if Paul is occupying an apartment at $50 a month, and John bids $60, Thomas $70, and Peter $75, Paul will have to meet Peter’s bid or surrender his apartment to Peter.

Under such an arrangement rents would come almost immediately into line—and into working relationship—with other prices and incomes. No one could denounce the landlord for asking an unreasonable or outrageous rent. He would not be asking any rent at all, but merely accepting what he was offered. Politicians could no longer picture the situation as a class struggle between landlords and tenants. It would be recognized as essentially the competition of tenants with each other.

Families on the outside would have as much right to bid for a new lease on an apartment as the particular family in it. What quarters you occupied, and at what rent, would no longer be determined by past individual luck or accident but by present conditions. Living quarters, like food and clothing, would once more be rationed by the purse. The economic principle would once more be emphasized that under competition prices are not determined by the greed or arbitrary whim of sellers but by the competitive bidding of buyers. Above all, rents would go to the level where they would give the maximum balanced stimulation to private building, remodeling, and repairs, thereby increasing the quantity and improving the quality of housing for the greatest number of families.