Here’s a letter to my state senator:
Sen. Dave Marsden
Senate of Virginia
I hope and trust that 2024 is off to a good start for you, Julia, and your family.
This letter, I think, is only the second communication that I’ve had with you about pending legislation in Virginia’s General Assembly. But my strength of feeling about this issue is so great that I feel obliged to write. In short, I urge you to vote against SB 366 – the pending bill that, if enacted, would prevent so-called “rent-gouging.”
We economists disagree amongst each other about much, but there are a few matters on which we – across the ideological spectrum – are in general agreement. One of these points of widespread agreement is on the very real dangers of rent control (see, for example, here, here, and here). This opposition to rent control has nothing to do with favoring landlords over tenants; it has everything to do with protecting tenants (and would-be tenants) from ill unintended consequences.
By decreasing the profitability of supplying units occupied by renters, restrictions on landlords’ abilities to raise rents spawn condo conversions and prompt builders to construct fewer rental units and more units for sale to owner-occupiers. People who can’t afford to buy housing are unnecessarily disadvantaged. Rent control also encourages empty nesters, who enjoy below-market rents for their three- and four-bedroom apartments and townhouses, to stay put rather than move into smaller units, thus discouraging younger families with children from moving to those larger spaces.
Empirical research confirms the economic theory. In this 2018 Brookings Institution paper, Stanford University economist Rebecca Diamond surveyed the research and concluded that “while rent control appears to help current tenants in the short run, in the long run it decreases affordability, fuels gentrification, and creates negative spillovers on the surrounding neighborhood.”
Before Karol and I moved back to Virginia in 2001 we lived in Westchester County, NY. I would often take the train from our home into Manhattan. On each trip I beheld the decaying shells of buildings in the South Bronx and Harlem. Inhabited by squatters, these buildings were abandoned decades earlier by their owners because New York City’s draconian rent-control regime made it impossible for these buildings to be operated profitably as rental units. And due to their location, these buildings weren’t candidates to be refurbished into owner-occupied units.
Rent control turned parts of New York City into what looked like a war zone. (I’ve not seen that part of NYC in many years, but my guess is that little there has changed.) My late GMU Econ colleague, Walter Williams, accurately observed that (recalling an insight first expressed by the economist Assar Lindbeck) “short of aerial saturation bombing, rent control might be one of the most effective means of destroying a city” – or, indeed, of any jurisdiction affected by rent-control restrictions.
Again, I urge you to vote against SB 336. I do so not because I’m a landlord or a renter; I’m neither. I do so because economics and the empirical evidence overwhelmingly confirm that the persons intended to be helped – low- and middle-income renters – will be harmed.