Rent caps encourage renters to move into housing not suited for them

The argument

The objection to rent caps here is not that they fail to lower rents but that they change who ends up living where, producing a mismatch between households and the homes they occupy. The two things a person weighs when looking for housing are price and size. Housing stock is differentiated accordingly: some properties are built for large families and others for one or two people, and multifamily housing costs more than single-occupancy housing. In an uncapped market that price difference does much of the sorting, since the larger home costs more and is taken by the household that needs and can afford the extra space. Rent caps are introduced to stop rental properties becoming too expensive. But by holding rents below market rates they weaken the price signal that had been matching households to homes. Families often earn less than individuals do, and when prices are held down the cheaper small units become the affordable option for them — so larger families end up in housing designed for single people. The reverse happens at the other end, with single people occupying larger apartments than they need because the capped price brings those within reach too. The result is a misallocation of apartments in both directions. The mechanism underneath is overconsumption. When rents remain below market rates, those with access to the lower rates — chiefly existing renters — consume more housing than they otherwise would, because the cost of holding on to a larger unit no longer reflects what someone else would pay for it. The stock does not expand to accommodate this, so what one household takes, another does not get. The outcome runs against the policy's own purpose: families should not have to pay more for rental housing, yet a cap leaves them competing for units too small for them. Because rent caps encourage renters into housing not suited to them, rent caps are not a good idea.

Context

Imagine a scenario where a family of four lives in a four-bedroom apartment for a decade. Then the two oldest children leave home and move into apartments of their own. The parents, not wanting to lose their discounted rent, opt to stay in the four-bedroom apartment. This is what is known as renter mismatch.

Premises

Counter-arguments

Rental caps are not the problem when it comes to misallocation of apartments. The opposite is true. Rental caps provide a way for all types of families and people to find good housing for a lower price. Without having houses or properties having stacked prices, it gives opportunities for more people to find homes. Having families stay in singes apartments is probably a better solution than having them stay in bigger rental properties. It’s cheaper for them. If families make less than single people, then single people should have no problem staying in a house that’s bigger than what they need. The whole point of rental caps is to make a cheaper solution for all types of people. Plus, rental caps aren’t the ultimate solution to having cheaper housing. Rental caps don’t determine how much someone can make. If a family cannot afford a bigger rental property. They should find ways to make more income. If a single person doesn’t have the funds to live in a bigger house, they should move to a different area.

Rejecting the premises

[Rejecting P1] Rental caps bring cheaper housing options to the market. [Rejecting P2] Families should find a way to pay for family style housing if they want it.