The liberal legislators in Oregon don’t understand basic economics and this legislation will only exacerbate the situation they are trying to prevent.
Rent control is one of the first policies that students traditionally learn about in undergraduate economics classes. According to the basic theory of supply and demand, rent control causes housing shortages that reduce the number of low-income people who can live in a city. Even worse, rent control will tend to raise demand for housing — and therefore, rents — in other areas.
Rent control, Econ 101 student learn, helps a few people, but overall does more harm than good.
Doug Bibby, President of the National Multifamily Housing Council, had this to say about Oregon’s new law:
“There is no doubt that housing affordability is a crisis in Oregon. However, SB 608 will worsen the imbalance between housing supply and demand by allowing for rent control across the state.
“While the intent of rent control laws is to assist lower-income populations, history has shown that rent control exacerbates shortages, makes it harder for apartment owners to make upgrades and disproportionally benefits higher-income households.
“Oregon lawmakers should focus on holistic solutions that encourage more housing supply, facilitate public-private partnerships to tackle many of the existing barriers, and increase direct assistance to renters.”
There are eight natural results from Rent Control measures.
- First, housing shortages will begin throughout the state- where possible apartments will be converted to condos and sold, demolish old buildings and build new ones or convert to short-term rentals;
- Second, development of new rental housing will decline;
Third, the quality of housing will deteriorate as landlords don’t have an incentive to improve the properties. It isn’t uncommon for landlords to cease making improvements to properties and be slow to repair issues (See this article in the NY Daily News);
- Fourth, inefficiencies in housing will occur. For example, a family with a three-bedroom rental (that would normally downsize when the time comes) will keep the three bedroom because of the lower rents;
- Fifth, because long-term renters benefit off the newer renters, Portland will become less attractive to persons and companies seeking to relocate;
- Sixth, black market transactions will flourish where landlords find alternate ways (e.g., fees) to increase rents where possible; and
- Seventh, rents will go sky high. San Francisco vacancy rate in the city is only about 2 percent now. When an apartment opens up, it’s not uncommon for 50 to 75 people to show up for the open house and those aspiring renters bid against one another.
- Eighth, homelessness will increase because of the points listed above.
Assar Lindbeck, a Swedish economist who chaired the Nobel prize committee for many years, once reportedly declared that rent control is “the best way to destroy a city, other than bombing.” Over time the state of Oregon will become a residential dump hole. Too bad for them. It was such a nice state.