Hope for the Homeless?

Rent control has been an experiment in econo-planning that proves what most economists already agreed upon—price controls cause shortages. Finally, people are beginning to make the connection between rent control and the crisis-of-the-day, the "homeless" problem. And a few farsighted politicos are actually doing something to stop rent control's destructive spread.

The most prominent advocate of the rent-control-causes-homelessness thesis is REASON Contributing Editor William Tucker, a New York writer. He looked at data for 50 major American cities and, as he reported in National Review, found that the nine rent-controlled cities had the lowest rental vacancy rates. Holding other things constant, a one percentage point decline in the vacancy rate was roughly associated with a 10 percent increase in homelessness. With rent control, builders refuse to build, tenants who can afford to move to better places stay put to preserve their great rents, and the resulting shortages make it profitable to convert low-income housing to condos.

At least a few savvy politicians are learning that, like ideas, stupid laws have consequences. In the past two years, 5 states have passed laws prohibiting rent control (bringing the total number of such states to 15). In California, strong rent control statutes are entrenched in several communities, including San Francisco, Berkeley, Los Angeles, and Santa Monica (the home of this esteemed publication but not the home of any of its employees, since no one could find a vacancy). But state Sen. John Seymour recently introduced a bill to withhold $63 million in state housing subsidies from cities that have enacted rent control statutes.

"If you want no growth, if you want rent control, if you want five-acre estate homes only, go ahead and do that," said Seymour. "But don't come to the state and ask us to resolve your low-income housing problem, your affordable housing problem, when in fact you were the ones who drove out of your city that affordable housing and low-income housing." The bill was defeated, but Seymour vows to try again next year.