Rent Control vs. Housing

March 14, 1949

We are all set to prolong rent control for at least another fifteen months. At the end of that period we will no doubt prolong it again. For the Administration means to extend rent control “until the supply of housing has caught up with the demand.” But every student of elementary economics knows that supply and demand are meaningless terms except in relation to a price. It is precisely prices, in fact, that bring supply and demand to a balance. As long as construction, repair, and service costs remain around 1949 levels, while we try to hold rents at prewar levels, supply never can catch up with demand. It is rent control itself that keeps supply from catching up with demand. It perpetuates the very problem it pretends to solve.

With the general cost of living 71 percent above the 1935–39 level, with furniture 96 percent above, clothing 96 percent above, food 105 percent above, and estimates of construction costs ranging from 80 to 145 percent above, our legislators insist on holding rents down to only 20 percent above. With weekly factory wages 144 percent above the 1935–39 level, the average worker pays for rent a far smaller percentage of his income than he ever did before the war or before the imposition of rent control.

In this column of Jan. 10 I discussed the pamphlet by Bertrand de Jouvenel on the appalling consequences of rent control in France. The British situation differs only in degree. The London Economist of Jan. 8 points out that where it was once considered normal for an English family to spend 20 percent of its income in rent, the proportion under rent control has dropped to the neighborhood of 10 to 12 percent. This decline, comments that journal, “is strange to find in combination with a severe shortage of housing—unless, indeed [as may be much truer than most people imagine] the low relative level of rents is a large part of the cause of the housing shortage.”

I have been receiving recently a number of letters from worried property owners. One that comes from a widow in Evansville, Ind., is typical:

“The majority of landlords are not wealthy people.... But today a landlord is apparently a despised citizen, classed with gangsters and criminals, all because he happens to have a house, for which he has worked and saved, and which somebody else now wants to occupy at his expense—namely, the tenant. The law gives it to him, because there are more tenants than landlords and that means more votes.... Tighe E. Woods claims that if rents were decontrolled they would go up 55 percent. Perhaps; perhaps not. Ten years ago I could get a room papered for $6; now it would cost me $20. What percentage of increase is that? . . . Naturally tenants want the law continued. If Congress were to pass a law to force grocers to give me groceries at half price I might endorse it myself. . . .”

If rent control is ever terminated, it will be because people come to recognize that under it old housing rapidly deteriorates and new housing finally ceases to be built. No new private apartments are put up in France today, for example, because they would have to rent at ten to thirteen times present rent ceilings in order to repay the costs of construction. Even in our own country there is already increasing pressure for solving the problem by public-housing schemes—that is, by forcing the taxpayers to subsidize each other as tenants.

To get us out of this government-created crisis I can only renew the type of compromise suggestions I made in this column of Feb. 2, 1948. Permit landlords now to raise rents each month, say, by 2 percent of the percentage that other items in the cost of living have increased since 1935–39. It would then still take 50 months, or more than four years, for the permitted increase in rents to equal the average rise in other items. At the end of that time decontrol could be automatic. Such a program would restore the incentive to maintain and build private rental housing at the same time as it got us tenants back to economic realities without too much of a jolt.