Occidental Israeli Rotating Header Image

Yet More Price Controls

Ynet is now advocating rent control (here, Hebrew). Citing similar practices in Europe and New York, it derides the idea that this is Bolshevism, and support a bill before the Knesset that would increase governmental pricing control. The relationship between communist ideology and government control over private property aside, the writer set forth what appears to be a long and detailed argument. Appearances, however, are deceiving. One particularly ridiculous argument caught my eye; the writer found it funny to associate rent control with communism, because in the Soviet Union, the state owned all property and property rentals did not exist. Basic finances allude the writer, because if your wages are set by your landlord–clearly you’re paying rent, as determined by the state-landlord.

As for the substance of the piece, the writer confuses two concepts: pricing-control and regulation of discrimination. “In the United States and Europe it is forbidden to refuse to rent because the tenants are homosexuals, immigrants, or even a family with children.” I do not know much about European law, but this statement of the law in the United States is misleading, at best. For one, there is no such thing as a single body of “American law,” especially when it comes to real property. Property law is largely regulated at the municipal level (not to mention distinctions between federal and state laws). Yet, addressing only federal law: (1) in most states, homosexuals are not a protected class; (2) in fact, the Fair Housing Act does allow one to discriminate in many ways, when it comes to choosing tenants (see ‘exemptions’).

Nevertheless, the result of such government intervention has been predicted, analyzed, and ignored long ago. As Richard Posner, has described, among others, rent control leads to a contraction in the housing market, because more people will decide that selling their property is a better financial move  (“if price is artificially depressed, or the costs of landlords artificially increased, supply falls and many tenants, usually the poorer and the newer tenants, are hurt”). The smaller number of rented apartments will be substandard, as it will not be in landlords’ financial interest to spend more than the minimum to maintain their apartments.

Ultimately, those who will be hurt will be the poor–not the evil wealthy. As described, there will be fewer low-cost apartments on the market, and those will be maintained even more poorly than they are now.  Rent control will “reduce the resources that landlords devote to improving the quality of housing, by making the provision of rental housing more costly.” (Posner)  The contraction in the rental market will lead to an increase in the supply of units for sale. The resulting decrease in purchase price will benefit the middle class, and the poor will be worse off than they are now. Another potential result is that wealthier tenants, who do not wish to buy, will opt out of governmental price-control, thus allowing them to benefit from a higher level of services–paid for accordingly.

The bottom line is that the ynet writer does not know the first thing about price control. Then again, the negative impact of such a move are unlikely to have a negative effect on her directly.

Bookmark and Share

One Comment

  1. Vonnie says:

    Howdy, i read your blog occasionally and i own a similar one and i was just wondering if you
    get a lot of spam remarks? If so how do you prevent it, any plugin
    or anything you can advise? I get so much lately it’s driving me crazy so any assistance is very much appreciated.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>