What are the effects of rent control, both good and bad?
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Rent control is good when done well, for proof look towards Vienna. Done poorly and you now have a great number of people unable to afford the mortgages they are obligated to pay due to the difference in rent prices.
Rent control only really works in a socialist collective first type of environment. One where the government builds all the housing and doesn’t rent it out with the goal of profits but with the goal of housing as many people affordably as possible.
In a capitalistic rent market rent control has basically no chance of being passed federally unless it comes with a tax break equivalent to the revenue lost due the government forcing lower rents. Imagine this for a minute.
If I’m a small time landlord who just bought their first property and I decided to rent it out for $1500 a month and also now have a mortgage of $1300 I’m likely not even breaking even after paying for home insurance and a company to handle acquiring/ handling tenant needs. So let’s say after a year of eating the loss I raised rent to $1800. At this point I am likely netting around $300 month before taxes.
Come next year and the “affordability rent control mandate” gets passed federally and suddenly I can’t charge more then $1000 a month. This is obviously an issue because now I am $300 in the red before taking into consideration any of the other costs of maintaining and filling said property.
As a single home owner this would devastate me as I am still legally required to pay the same mortgage despite the property now only earning me a max of $1000 a month. In this hypothetical, I would likely end up defaulting on my mortgage and the bank would foreclosure on my house.
This is the issue with rent control in a vacuum, in order for it to work tax breaks / rebates equivalent to the difference in rent received versus the expenses of running said property need to come alongside any form of rent control. That would cost the government allot of tax money so getting any politician to support such a movement is very hard because in the short term it would mean allot less money for everyone. Not particularly helpful if you’re looking to get reelected, even if it’s more then worth it in the long run.
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