Rent caps keep rent affordable

The argument

The case for rent caps is that they address the specific failure which makes urban housing unaffordable: rents that rise faster than the incomes meant to pay them. In cities where wages are not keeping pace with rent increases, affordability does not deteriorate through any change in what tenants earn or what housing costs to provide. It deteriorates because landlords can raise prices faster than tenants can raise earnings, and nothing in an uncapped market prevents that divergence from continuing indefinitely. A cap, implemented effectively, works on both sides of that problem. It protects new tenants from paying wildly inflated rents on entry, which matters because the moment of signing a lease is when a tenant has least leverage: the alternative to accepting an inflated price is not a better price elsewhere but no home at all. And it protects existing tenants from facing exorbitant increases midway through a tenancy, which matters for a different reason. A sitting tenant has already committed — moved schools, taken a job within commuting distance, built a life around an address — and a large mid-tenancy increase extracts money from them on the strength of how costly it would be for them to leave rather than on the strength of what the housing is worth. Together these two protections cover the whole of a tenancy, and covering the whole of it is what keeps rents affordable rather than merely postponing unaffordability. A policy limiting only entry prices would be undone by subsequent increases; one limiting only increases would be undone by inflated starting rents. The qualification proponents attach is that the design has to be right — effective implementation is doing real work in this claim. But where caps are properly constructed, they hold the cost of housing within reach of the wages actually being paid in the city, which is what affordability means.

Context

Limiting the amount a landlord can charge a tenant ensures that rents do not rapidly rise year-on-year.

Premises

Counter-arguments

Rent caps may keep rents affordable in the short term, but in the long term they do the opposite. Rent caps that keep rents below the market rate incentivize property sales among landlords, leading to a reduced stock of rental properties. The basic rules of supply and demand mean that with fewer rental properties on the market, rents will go up in the long term. Any gains of rent caps in the short term are eliminated in the long term.

Rejecting the premises

[Rejecting P4] In the long term, rent caps lead to less affordable housing.

Framing

Government interference in markets can be a good thing when used correctly.