Could somebody please send Poto Williams a copy of Thomas Sowell’s Basic Economics?
Actually, don’t bother: it’s got big words, lots of them, and no pictures. Besides, as we all know, basic economics are kryptonite to the Ardern government.
Which is a pity because if they had a grasp of basic economics they wouldn’t be entertaining something as foolish as rent controls. But then, a government led by a socialist is always going to be a sucker for demonstrably failed economic ideas.
Especially if they’re big vote-winners.
Nothing is off the table, including rent controls, as Government officials search for ways to help people struggling with the cost of accommodation, Associate Housing Minister Poto Williams says.
“I’ve charged our officials at HUD (Ministry of Housing and Urban Development) to go away and look at what are the options we can put in, in the short term, to support our renters,” she told Breakfast on Thursday.
“We’ve asked the officials to come back with a list next week of things that we can look at. There is nothing off the table,” Williams said.
“There are a whole lot of proposals that are being floated at the moment, including things like rent control and indexation. There are other things that I’ve asked our officials to look at.”
Let’s do Williams’ homework for her. As Sowell points out, everywhere rent controls have been imposed, the result is a shortage of housing and rising rents. Because imposing artificially low prices on existing supply of housing distorts the market.
On the demand side, people “squat” in existing rentals, while others who might stay at home a bit longer or share rentals, are instead encouraged to move out, or to occupy rentals that were far bigger than they needed. In rent-controlled areas of the US, the majority of rent-controlled properties had only a single occupant: double the national average.
Rent controls affect supply as well. When rent controls are imposed, people stop investing in rental properties, simply because the return drops below the point of viability. Instead, investors and developers turn to things like commercial properties, which because of rent-controls on housing, offer a better return. It’s not unusual, in fact, for rent controls on housing to lead to a glut of office buildings.
Properties deteriorate faster under rent control, as well. Landlords, seeing less return, are less inclined to spend money on upkeep. At the same time, by encouraging tenants to remain in the same property longer, rent controls remove the incentive for landlords to keep their properties as competitively attractive as possible for the next prospective tenants.
Long story short: rent controls will only make New Zealand’s housing crisis worse.
Even Williams seems dimly aware of this.
“Proposals around rent controls and the like overseas have shown that while it will alleviate issues in one area, it sometimes causes problems in others,” Williams said.
Stuff
Indeed, there is one area in which rent controls are enormously attractive to mendacious socialist governments.
In Sowell’s words, Politically, rent control is often a big success, however many serious economic and social problems it creates. Politicians know that there are always more tenants than landlords and more people who do not understand economics than people who do. That makes rent control laws something likely to lead to a net increase in votes for politicians who pass rent control laws.
Who cares if NZ’s housing crisis just keeps getting worse, so long as the dogs of dependence keep voting for the hand with the handouts?
The Ardern government may not be economically smart, but they’ve got more than enough political rat-cunning to make up for it.