Rent Control: It's Not As Commie As You Think

As you have probably noticed, a lot of people who want to live on campus next year aren't going to be able to, mostly because a lot more people want to live on campus than have wanted to in years past. University President C.D. Mote said recently that in 1993, the campus had 7,300 beds and 1,100 vacancies; today it has 10,300 beds and a 3,000-person waiting list. That's not a waitlist that will give anyone much hope of getting in, and many of those displaced souls have taken the next logical step: trying to live as close to campus as possible without actually living in a dorm. That is, in College Park.

College Park landlords have reacted gleefully to the skyrocketing demand, seemingly raising rents every time they see another frustrated student hit the streets looking for housing. Numerous students have seen their second-best option disappear due to finances, and they have reacted by urging the city to enact some form of rent control. The city, in turn, has agreed that studying the issue would be a good idea.

That sound you just heard was the huffing of indignant economists having a Pavlovian reaction against the idea of a municipal government trying to mess with our beautiful market economy. And indeed, many of the arguments that have been used to advocate rent control have big, deplorable holes. Yet there is a good argument in favor of rent control in College Park, as long as you can accept that we use markets to serve our interests, not the other way around.

When they're lambasting rent control, devotees of the laissez-faire invariably point to the disastrous system set up in the wake of World War II in Manhattan. The rents of certain apartments were fixed forever at their levels when the law was passed; this is why everyone you know in New York knows someone whose daughter's podiatrist's aunt is living in a palatial expanse in an Upper East Side high-rise for $400 a month.

Would you want to take the trouble of dealing with New York City housing authorities, deadbeat tenants and stickup kids to rent an apartment to someone for $400 a month? Me neither. Nor did numerous landlords, who found their ability to profit from their property severely limited. They either pulled out of the market or simply refused to maintain their apartments. Given the numerous restrictions placed on them, new builders only found it profitable to serve the massively wealthy. The result is Manhattan's present situation, in which there are amazingly few apartments and, except for the rent-controlled ones, they are all amazingly expensive.

Nothing like that is being proposed for College Park, thankfully. The model being considered is Takoma Park, a little liberal enclave to the southwest of this campus. In the T.P., rents can be raised each year by a flat rate of 70% of the inflation rate. Landlords can also petition to increase their rents if they make capital improvements that meet certain criteria, like adding dishwashers; if they suffer unfavorable changes in financing (mostly related to interest-rate movements); and other such reasons. The city, of course, is free to deny such petitions.

This is way better than NYC's old system, but it would still have the effect of restricting supply. This fact has escaped some advocates of rent control, including the Diamondback, which opined in its staff editorial of Feb. 4 that the point of rent control is that "Students will save money. That's the bottom line." The arguments against rent control "seem subtle and complex," apparently too much so for the editorialist to consider.

Well, the outcomes of rent control are actually pretty clear: Landlords wouldn't know for sure that they could make their money back on improvements, and they wouldn't be able to get increases for anything not covered in the petition guidelines - and there's always something not covered in the petition guidelines. So fewer people would want to take the trouble of renting out their apartments and houses, and they'd be less eager to expand the housing stock in the future. The only students who would save money are the ones who can find housing, and there would be fewer of those. Students who would be willing to pay the market rate for housing will be denied that opportunity. And maintenance would probably become slightly worse, if that's possible.

Still, it's easy to overestimate the bad effects; the Takoma Park model is as flexible as you're going to get. The key question is: Is what we get in return more than what we give up? The College Park housing market will always be subject to wild price swings like this because demand changes yearly. Controlling the volatility somewhat would allow those students who can still find housing to live near the campus without constantly scraping for money or piling three or four into a room. Needless to say, avoiding such cash struggles would help their academic performance. Having as many people hanging around as possible also creates more of a sense of community. These are real benefits; they don't show up when you draw a graph of the supply and demand in the housing market, but they are no less desirable for that.

The market is a tool we use to allocate goods and services, not an almighty being to which we sacrifice our incomes. Playing around with the market just because you don't like the outcome is a bad idea; saving students money does not come without costs. However, if the market fails to take things into account, we may need to tinker with it in order to make it work properly for us. In this specific situation, given the volatility and the benefits of having students live nearby, rent control is a good idea. But coming at a problem without considering both costs and benefits almost always leads to a bad decision.

Diamondback editorialist and, not coincidentally, my commentary editor Holly Cummings was extremely professional about being made fun of a bit in this column. Thanks, Holly.

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