Rent control is a horrible idea.

Government meddling in markets is never a good thing. It never ends well. It always makes things worse. These things are as certain as gravity, and such government meddling, like gravity, has the potential to cause a lot of pain if you lack awareness of the vulnerabilities. This is Economics 101.

Rental properties, like pharmaceuticals, like any other commodity, are subject to the laws of economics. And, as with so many other things, well-meaning but essentially ignorant folks think that contrary to centuries of evidence, that governments can somehow control prices without affecting supplies. But it just doesn’t work. Now California and Oregon are trying this idea yet again.

Rent control 2.0 strikes “the right balance between protecting tenants from egregious rent increases [and] providing landlords with the ability to make a fair rate of return,” then–California Assemblymember David Chiu (D–San Francisco) said in 2019, when the Golden State was preparing to follow Oregon’s lead by passing the nation’s second-ever statewide rent control law.

Just four years later, legislators in California and Oregon are considering legislation that would turn rent control 2.0 back into the more familiar version. That development is a reminder that the rent control ratchet moves in just one direction.

In California, Sen. Maria Elena Durazo (D–Los Angeles) has introduced a bill that would reduce the state’s allowable rent hike, currently the lesser of 10 percent or inflation, to the lesser of 5 percent or inflation. The “right balance” Chiu endorsed in 2019 apparently was not the right kind of right.

This a ratchet, not a dial, and it only ever moves in one direction:

Oregon legislators, meanwhile, are considering a bill that would lower the state’s current rent cap of 7 percent plus inflation to the lesser of 10 percent or 5 percent plus inflation. The state’s existing cap gives landlords a lot of flexibility to raise rents in response to rising inflation, which proponents said would not constrain the housing supply. But after several years of high inflation, activists and lawmakers are demanding a stricter standard.

The story in New York is similar. In 2019, the state legislature tightened and expanded a longstanding rent stabilization ordinance covering nearly 1 million apartments in New York City. Now lawmakers have proposed a “good cause eviction” bill that would let tenants challenge any rent increase in court. Rent increases of 3 percent or more would be considered presumptively unreasonable.

Once you concede that the government should regulate rent increases, it’s only a matter of time before “smart” rent control policies give way to less thoughtful ones.

There will always be people out there shouting that the rent is too damn high. We shouldn’t base economic policy on people shouting, although that seems to be the modus operandi of governments at all levels at the moment.

According to Zillow, the average rental price for a two-bedroom apartment or condo in California is $2,502. In Oregon, it’s $1,851. Both of those are quite a bit higher than the national average, which as of last February was $1,320. Bear in mind, also, that both California and Oregon are seeing an exodus of their residents, which, one might think, would tend to depress property values and, also, rental prices. But that doesn’t seem to be happening. Policies that restrict supply are a large reason why.

Another problem with rent controls lies in the inability to adjust to changing costs. We are currently suffering a shortage of construction/repair workers, which will make not only new construction more expensive but also the maintenance of existing structures. What happens when a landlord, allowed only a three percent increase in rents, is facing a ten percent increase in maintenance costs? The answer is usually “get out of the rental business,” which, of course, reduces supply further.

Government interference in markets never works. It always makes things worse. Given time, markets themselves usually sort things out; in a free market, as a city grows and rents increase, enterprising builders will put up new structures, capital will find its best return in rental properties, and the increase in supply will moderate the increase in costs. That’s how free markets work. But every day, in every way, ill-informed politicians seemed determined to restrict free markets — to restrict liberty — and to make things worse.