The Magic of Rent-Controlled Living

Investment Analysis Clubs Macro Economic Trends and Risks
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Conservative economic thinking almost universally says “rent control is bad”, but they don’t seem to account for the large amount of for-profit, “skim, scam and fraud” in the industry. Perhaps the conservative gas lighters are benefiting from the fraud?

{{ Ms. Jenkins’s apartment searches were guided by two essential sources of wisdom: her past experiences and her TikTok feed. “I’ve learned a lot on my own,” she said, “but for this most recent apartment search, I was seeing a lot of TikTok videos from Allia Mohamed.”

Ms. Mohamed is the co-founder and chief executive of a company called Openigloo, which provides fee-based services to renters to better understand their rights, potential buildings and landlords before signing a lease.

“Allia posts a lot of great content,” Ms. Jenkins said, “and I kind of learned a lot about rent stabilization laws through that, and I had an idea what to look for during my apartment search.”

Even still, there was something about the rent amount that still didn’t quite feel right. It seemed too high for a rent-stabilized unit. “I learned from Openigloo, you can request the D.H.C.R. rental history right away,” Ms. Jenkins said.

The Division of Housing and Community Renewal is a state agency that can provide a rental history for an apartment — if it is requested by the renter. That history includes details regarding whether a unit is designated for a particular program, such as rent stabilization, and information about previous rent rates and increases over the years. All of this information is essential to confirm that a unit is being rented for a legal amount.

The details on Ms. Jenkins apartment revealed that her rent amount was nearly triple what the previous tenant paid. “I know that they can raise the rent after renovating,” she said, “but it jumped from roughly $1,100 to $3,400.”

She got her rent reduced to $1,500/month (in Manhattan!) Not quite the 0% tax rate gifted to those living off investment income or inherited wealth, but it’s a start. {{ LOL }}

Free link:
https://www.nytimes.com/2026/06/03/realestate/renters-rent-stabalizion-mistake.html?smid=url-share

intercst

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It’s not conservative to think rent control doesn’t work. Nor does conservative economic thinking seek to promote fraud anymore than those supporting govt programs want to promote fraud, waste, and abuse. But, it is the reality that those things simply exist under either approach. Rent control probably actually encourages fraudulent behavior, as unscrupulous owners try to extract profit or game the system elsewhere as margins decline.

It’s been tried enough to know it doesn’t scale, at least with rare exception, or without other unintended consequences. I know a number of investors in the large multi unit industry. The margins can be incredibly thin and any mistakes in assumptions about future vacancy, competing new builds, costs, borrowing rates and or rent increase can be disastrous. In addition, COVID era policies have made it difficult and financially expensive to remove tenants that fail to pay rent. Do bad actors exist, yes, they do in every industry. Renters do deserve certain protections and access to resources.

Rent control of course works for existing tenants at the micro level. However, it’s incredibly expensive for new renters and ultimately it harms the broader long term supply. The only areas I know of where it works at all are in rare places where the municipality steps in to add supply as demand increases. It’s a coordinated effort between multiple programs and at least attempt to address the potential supply problem. In the end, it only works so long as the tax payer can subsidize the program and difficult to scale in large urban areas. It raises the question of whether taxpayer dollars should just be a credit towards housing rather than used to control the price of rent.

Arguing for rent control/stabilization is in some ways arguing for wage control. It’s saying that all the labor input related to ownership should be fixed as well, including maintenance, management services, insurance, and other labor dependent costs.

It does help a lucky few that win the renter’s lottery. Beyond that, so long as the expectation is that investors meet the demand needs, it creates little incentive to improve existing properties or build new ones.

I see the broader value of openigloo as a kind of the yelp for renters that encourages transparency. It provides a consolidated source for renters to see reviews of landlords and buildings. In many ways, it is another example of entrepreneurs in an open market seeing a need for a service and developing a product to address it. If not for rent control, it might have a much bigger impact on landlords. Properties that are better maintained, provide value, and where the owner is attentive, will end up with higher reviews and might even be able to charge a premium, as renters are willing to pay up. Poorer run properties would suffer lower demand and be forced to provide upgrades or rent concessions to draw in renters or even face bankruptcy. It would then give a more thoughtful entrepreneur the opportunity to better serve the market.

There’s always someone else that has it a little better or a little worse. “Envy is the worst of all sins, you get nothing out of it” - Charlie Munger.

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I think this misapplies the reason conservative economic thinking says “rent control is bad.”

Neoclassical economics doesn’t say rent control is bad for the specific people who manage to get a rent controlled apartment at rent-control prices. In fact, it says that such a situation is quite good for those folks! The claim is, rather, that it’s bad for nearly everyone else in the market. The landlords, obviously. But also bad for every other person who wants to rent. By reducing the expected economic returns to investing in rental residential buildings, you get fewer people willing to develop rental residential buildings. Housing gets more expensive for everyone…except, again, the small slice of the renters who are able to get the rent-controlled housing.

Only if the proportion of renters who get rent-controlled housing gets large enough does it become bad for everyone - because then the impact on housing investment is large enough to not only be terrible for the market rate renters, but for the rent-controlled renters as well.

To the remaining points in your post, neoclassical economics would clearly recognize that there are benefits to landlords to evade rent-control regulations to the extent they can get away with it.

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Unless government steps in to build housing and mitigate the effects of lower private investment. I think it’s been mentioned before…Vienna!

Government subsidized and owned housing - that would certainly flip the lids of our friends on the right.

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You might want to do a little more digging on the Vienna approach. It’s not so much rent control as it is govt owned housing, artificially keeping rent low, and then a combination of non or low profit privately held properties. What they do attempt to solve is the supply problem by a commitment of about 7000 new units per year to be built by the govt, funded through a combination of taxes levied on workers and residence. Of course, this arrangement has become harder and harder to financially sustain.

What is often not said by the proponents of the Vienna model is the other costs and problems. There really is no sort of ongoing income requirement to prioritize those that can’t afford it. Many professionals that qualify early on continue to enjoy lifelong low rent and can even pass on the apartment to other family members. In addition, these low rent units exclude other costs that are normally included in the rent in other cities, erasing much of the cost difference. For newer renters seeking homes, the financial costs are even larger. The program requires the renter to make a financial commitment up front. It equates to as much as about $38k out of pocket immediately, just to obtain one of these rent controlled units. For most renters, it’s not the kind of money readily available.

The Vienna model emerged post world war 1 when the area was devastated and the govt was able to buy up or sieze a lot of cheap land. The other issue is Vienna is essentially the only or primary seller of buildable land. From a practical standpoint, it makes it difficult to scale or apply to modern societies where private property rights already exist. It also uses its monopolistic power to charge huge premiums to builders that want to use it for private purposes, which in turn raises the costs for renters and buyers that don’t enjoy subsidized housing.

It’s not a left or right issue in my mind. It’s just policymakers citing these examples rarely fully examine the entire picture and look at the micro benefit vs the macro consequences. They also fail to ask some important questions.

Where has it really worked in the past, at what cost, and compared to what other alternatives?

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Unaffordable housing is often cited as a major economic concern across the US. How would you fix it?

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That’s a long and complicated subject. I suppose I would first start by asking how do we define unaffordable and when and how did it become unaffordable? Some areas have geographical restraints that make it difficult to fix, Hawaii, Hong Kong, Miami, West Palm Beach.

The other issue is we probably need to separate out for the poorest providing housing or income resources vs the more general concept that housing is expensive, which it is. These are separate problems that may require differing solutions.

But, there is a much larger issue and it is our fiscal irresponsibility. By some estimates, the true rate of inflation is closer to 8% annually. It puts a burden on most consumers that is quickly eroding purchasing power. Absent a willingness to gain some fiscal responsibility at the GOVT level and stop printing money, the continued gap in income growth and the cost of housing is likely to increase. I’m not sure the other band-aid solutions can offset that problem.

I do think DeSantis has the right idea of trying to eliminate property taxes on primary residences up to a certain figure, as a start. It at least alleviates a growing financial burden for longer term home owners that are living on limited income. However, I recognize that may in and of itself translate into higher prices but could allow buyers to pay up with more spendable income on the property itself. But, Florida has the luxury of a booming economy and its entire state budget for 23 million people is the same size as NYC’s that serves nearly 8 million.

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I wouldn’t assume there’s a fix. It’s not like this is limited to the U.S. - there’s similar concerns about an affordability crisis in Europe as well:

Housing crisis: why prices are rising and what the EU is doing about it | Topics | European Parliament

…though perhaps not in Vienna specifically.

If you’re looking for a fix, you need to identify the problem (as FOOLME45 notes). A big part of it is supply. Below is a graph of housing starts - construction of new units. We never recovered from the collapse of building from the Great Recession. Since the Great Recession, we have generally been building far too few homes. We’ve been building at a slower pace than since the mid-1990’s - when the country had 80 million fewer people.

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New Privately-Owned Housing Units Started: Total Units (HOUST) | FRED | St. Louis Fed

There’s no fix that doesn’t involve somehow getting a lot more homes built. The problem, of course, is that there’s huge political incentives against getting a lot more homes built. Which is why there might not be a fix…

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This is mostly a version of Mamdani’s pied-à-terre tax.

Funny thing, if you tax incomes, the rich can simply move to another domain. (Irony: they’re moving to Florida). If you tax property, well, it’s property, it can’t move. And like the hotel tax, it falls mainly on “other people” if you structure it right - which DeSantos is now trying to claim credit for. It isn’t his. It’s the “socialist” in New York who got it passed.

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40 years of privatization may have put that out of reach, like so many other sensible things.

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No, they aren’t even remotely the same thing. Mamdani’s plan is a tax increase on secondary homes over a certain value with zero reduction in property taxes for homeowners below a certain threshold. In fact, Mamdani had planned a 9% increase in the rate for everyone until the State govt bailed them out.

DeSantis’ plan is a homestead exemption for primary residences up to $150k in 2027, $250k in 2028 and then the goal of complete elimination of property taxes after that. For Commercial properties, rental properties or vacation homes, the tax rate will remain the same but no planned increase.

Do socialists ever want to lower taxes? They are the ones fighting passage of the bill in Florida. If you structure taxes right, you draw in more people, more businesses, more economic development, and with that more overall tax revenue. Besides the fact, it provides direct economic relief to homeowners by eliminating a lifelong annual expense. There is also something wrong in my mind with taxation in perpetuity of an asset that one owns and has spent a lifetime paying off.

Mandani’s tax will fill some holes in the budget gap but I doubt it does anything to improve the affordability problem. The DeSantis plan doesn’t seem increase taxes on anyone and at least attempts to address affordability issues.

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