More generally, it will pay the landlord to include in the lease contract any terms that are worth more to the tenant than they cost him – and adjust the rent accordingly. Given that he has done so, any requirement that he provide additional security (or other terms in the contract) forces the landlord to add terms to the lease that cost him more than they are worth to the tenant. The ultimate result is a rent increase that leaves both landlord and tenant worse off than before.
DBx: Price theory is beautiful. Among it’s many splendid features is that it warns that government efforts to change one or more terms of an exchange (for example, the level of physical security landlords provide to tenants) will result in changes in other terms of the exchange that make the intended beneficiaries of the first change worse off.
One of many terms in landlord-tenant exchanges (or contracts) is the amount of money that tenants pay monthly to landlords. Proponents of rent-control naively believe that forcing down this term of exchange – that is, forbidding tenants from paying more than some government-allowed monthly rent – is the end of the story. Rent-control proponents stubbornly refuse to see that rental contracts contain countless other terms – some explicit, most implicit – that will, when rent-control is imposed, be adjusted in ways that leave tenants worse off even though tenants are paying a smaller amount of money each month to landlords.
Most proponents of rent controls (and of price controls generally) call themselves “progressive” – a term that in practice seems to be a label for people who proudly look only at the most obvious, intended consequences of economic and policy actions, while ignoring less obvious and unintended consequences.
