San Francisco rent control, affordable housing.
Here's an example of the sort of thing I've found convincing in the Critical Review readings. I mention it specifically because it occurred to me that it might be of direct interest to at least two people who may be reading this. It has to do with applying some basic economics to affordable housing (using San Francisco as a particular example).
The argument basically blames the shortage of affordable housing in San Francisco and elsewhere (Europe-wide, for example, after WWII) on rent control--fixing the price of rent below it's market value.
The idea is that while in the short term it favors whatever tenants are living in a particular area by letting them pay less, all sorts of hell breaks out due to secondary and otherwise unforeseen effects, like:
The argument (which is made, by the way, by somebody named Hazlitt) then says that governments then accuse "the capitalist system" of not supplying enough housing (when it’s really their rent control--the distortion of the market--that's responsible.) So they then have to go through hoops to subsidize new affordable housing....
Meanwhile, current tenants in price-controlled housing are so politically affronted by the idea of the rent control lifting that it never happens. So the result is the currently-housed being subjected to favoritism by the government at the expense of the general population (who are paying for the subsidy) and the currently un-housed (for whom there would be housing if that housing which exists were not being used inefficiently).
My question is whether this reasoning makes any sense to those of you with more hands-on experience of this sort of thing.
The argument basically blames the shortage of affordable housing in San Francisco and elsewhere (Europe-wide, for example, after WWII) on rent control--fixing the price of rent below it's market value.
The idea is that while in the short term it favors whatever tenants are living in a particular area by letting them pay less, all sorts of hell breaks out due to secondary and otherwise unforeseen effects, like:
- Landlords start to run at a loss, and have no incentive to maintain the affordable housing, so it degrades into a slum.
- There is no incentive to build new affordable housing, because nobody can the market rate rent for it. So the shortage of affordable housing continues.
- Since the current tenants can keep their super-low rents, they use the space inefficiently--i.e., if prices were higher, tenants would economize more and take up less space, which would in turn allow other (presumably otherwise homeless) people to fit in.
The argument (which is made, by the way, by somebody named Hazlitt) then says that governments then accuse "the capitalist system" of not supplying enough housing (when it’s really their rent control--the distortion of the market--that's responsible.) So they then have to go through hoops to subsidize new affordable housing....
Meanwhile, current tenants in price-controlled housing are so politically affronted by the idea of the rent control lifting that it never happens. So the result is the currently-housed being subjected to favoritism by the government at the expense of the general population (who are paying for the subsidy) and the currently un-housed (for whom there would be housing if that housing which exists were not being used inefficiently).
My question is whether this reasoning makes any sense to those of you with more hands-on experience of this sort of thing.