Are rent caps a good idea?

Encyclopedia of Opinion

Question: Are rent caps a good idea?
Position‹2 of 3›: No, rent caps are not a good idea
Argument‹3 of 5›: Rent caps disadvantage new renters

Rent caps overwhelmingly favour existing renters and disadvantage renters entering the market.

The argument

Opponents of rent caps argue that the policy does not reduce the cost of renting so much as move it from one group of renters to another, and that the group it moves the cost onto is the one least able to resist. The mechanism lies in how the rules are written. A cap prohibits a landlord from raising the rent on a sitting tenant by any significant margin, but it says nothing about the rent a landlord may charge a new tenant taking on a vacant unit. Protection therefore attaches to the tenancy rather than to the person, and only once that tenancy has begun. The consequences follow mechanically. A landlord whose income from existing tenancies is held down has every reason to recover the difference at the one point where the price is still free to move, which is the moment a unit is let to someone new. Rents for new entrants rise to offset the revenue lost on capped tenancies, so the shortfall is not absorbed by landlords but passed to the next tenant through the door. The distributional result is what opponents object to. Those who benefit are established renters, who tend to be older and already housed; those who pay are the younger people and new arrivals entering the rental market for the first time, who have no accumulated tenancy to be protected and are overcharged to make up the difference. San Francisco is cited as the case in point: between 1994 and 2010, renters in the city collectively saved $2.9 billion in rent hikes, while those who came to the city and started renting after 1994 paid an additional $2.9 billion across the same period. On this account the policy does not make renting cheaper; it charges newcomers for the discount given to incumbents. Rent caps are not a good idea.

Context

San Francisco expanded existing rent caps in 1994 to control rapidly increasing rents. Research shows that they benefitted those that were already renting, but severely handicapped new renters entering the rental market.

Premises

[P1]Rent caps limit rent rises for existing tenants but let landlords charge new renters higher rates. [P2] In San Francisco from 1994 to 2010, established renters saved $2.9 billion while newer renters paid an extra $2.9 billion over the same period. [P3] So the benefit goes to older, established renters while younger new entrants are overcharged to offset landlords' lost revenue. [C] Therefore, because rent caps disadvantage new renters, rent caps are not a good idea.

Counter-arguments

This argument only applies to rent caps that limit rent increases. It is not valid against absolute rent caps that limit how much rent landlords can charge, both to new tenants and existing tenants. These forms of rent caps do not disadvantage new renters and ensure the benefits of rent caps are more evenly distributed between established and first-time renters.

Rejecting the premises

[Rejecting P1] Absolute rent caps set limits on what landlords can charge new renters.