Johan Almenberg, a loyal MR reader, asked me to ask Tyrone why rent control is a good idea. I walked over to Tyrone’s crawl space, knocked, and posed the query. He ridiculed me and told me the question was really not worth his while:
You Troglodyte, surely you know the happiness literature shows that better or larger living quarters don’t make people much happier. It’s one of the pleasures we most quickly get accustomed to. So if rent control pushes everyone into a lower price, lower quality equilibrium for residences, that’s for the better. If you want high cost living, go to Monaco or Aspen; low rents were what made New York City great. The greatest American city, during the highest cultural peak of its existence, had lots of binding rent control.
Rent control also encourages new or refitted buildings to have a greater number of smaller units. In other words, it brings more population to the city and we all understand the external benefits from having more people around. Furthermore the external social benefits of cities are highest for the elderly poor, who can’t afford cars and would require external aid, and bagel-seeking young’uns, high in human capital, low in liquid wealth, and able to do great things for the world if only they are removed from the suburbs. That’s exactly who rent control puts into your city.
Johan himself offers an interesting argument:
…if rent control makes it
harder to live in a particular city temporarily, this encourages long-term
commitments. This, in turn, could increase the repeated-game character of that
city, which in turn could be good for cooperation. These sort of arguments –
admittedly vague – tend not to get mentioned.
Did I mention that Tyrone is biased, because he lives under rent control himself? That’s right, he lives upstairs in the crawlspace. It is the strongest force in the world that won’t let me charge him a price any higher than zero. And the resulting arrangement seems to work out just fine.