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Few practices are as infamous in the annals of medical history as bloodletting. This once common procedure, used for centuries, often did more harm than good, weakening patients to the point where their bodies could no longer fight off the diseases they were supposed to cure.
I was reminded of this ancient yet foolish practice when President Joe Biden announced a national rent control plan in July. Like bloodletting, rent control is symbolic of how poorly understood interventions can exacerbate problems rather than solve them.
Texans have experienced the difficulties and costs of high rents, particularly in the Austin area. Between January 2021 and January 2022, rents surged by 35%, one of the highest increases in the nation. In 2022, rents continued to climb, with the average rent reaching as high as $2,662 monthly.
At that point, to quote Ronald Reagan, the "magic of the marketplace" took over. Sensing an opportunity to increase supply in a tight market, entrepreneurs began investing heavily in constructing new homes, apartments, and condominiums.
Rents in Austin have dropped by 12.6 percent — the largest decline in the United States. It has even reached the point where builders have pulled back on permitting requests for fear of a glut of available housing.
While Austin took the free-market approach to solving this problem, the Biden Administration is proposing more big-government interventions, which will prove counterproductive and reverse much of the progress Texas has made in lowering the cost of its apartments.
In his State of the Union address, President Biden said, “We’re cracking down on big landlords who break antitrust laws by price fixing and driving up rents.” That line described his Department of Justice’s actions to investigate the software of analytics companies that assist landlords and property owners in pricing their units. Then, weeks ago, the president took this scapegoating a step further by proposing a nationwide rental cap of 5%.
Like the bloodletting of patients, these “cures” will be worse than the disease.
Government price caps on goods, services, and rents are not new; they have been tried since the Code of Hammurabi 4,000 years ago. Even The Washington Post admits that economists of every ideological strain agree that they always led to shortages, reduced quality, and created black markets, damaging economic stability and growth.
If the Biden Administration succeeds in its rent control ambitions, the same will happen to the Austin housing industry. The incentives we created for developers to construct new affordable housing units will disappear as the Administration’s price cap will no longer make it affordable for many of them to continue building. Our rent prices will go up rather than down.
Sadly, the Administration is getting some legal help in implementing rent control from states across the country.
Liberal attorneys general have begun initiating lawsuits against at least one of the algorithmic property companies that landlords use to help them with pricing, claiming that companies analyzing market conditions and sharing its findings with property managers somehow creates a “conspiracy” to set prices. However, as we have seen in Austin and elsewhere, knowing the market is not the same thing as setting the market, and markets adjust when left to their own devices. The government shouldn’t try pushing costs down with a federal rent price cap, regulations on pricing software, or any other form of rent control.
I know Texas Attorney General Ken Paxton personally. He understands that rent control is a ridiculous idea. However, all it will take is for enough members of Congress to bite on President Biden’s federal rent cap or one of these state lawsuits succeeding for Texas to watch the great progress it’s made in reducing rent prices wither away.
Just as patient bloodletting was eventually abandoned in favor of evidence-based medical practices, policymakers must likewise learn from past failures. Effective solutions to the housing crisis should focus on increasing supply through deregulation and encouraging investment rather than imposing price caps. Only by embracing market-driven strategies can we hope to achieve stable and affordable housing for all.
Matt Mackowiak is the president of Potomac Strategy Group, served in the Bush administration at the U.S. Department of Homeland Security, on the Bush-Cheney re-election campaign, and was a senior communications aide to two U.S. Senators and a Governor.