Tag: rent control

The CDC’s Housing Takeover

The CDC’s Housing Takeover

“The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.” – Henry Hazlitt, Economics in One Lesson.

Eric Martin and his wife reside in Houston, Texas, with their two children. He is a follower of the Austrian school of economics, defends individual liberty, and promotes a foreign policy of peace, commerce, and honest friendship with all nations; entangling alliances with none.

You can find more of Eric’s political and economic commentaries on his substack, actionaxiom.substack.com. Follow him on Twitter @ericmartintx.


Continuing its attack on private property and the constitution, The Centers for Disease Control and Prevention (CDC) extended its eviction moratorium. A move even the editors at the Washington Post said was illegal. 

The eviction moratorium imposes stiff fines on property owners who evict tenants: Landlords in violation of the moratorium may be subject to a fine of up to $100,000, one year in jail, or both; the fine increases to $250,000 if the violation results in the death of a tenant.

If you think the CDC’s canceling rent for millions of tenants is a slippery slope, you are not alone. In September, Senator Pat Toomey (R-PA) asked,

“If the CDC has the authority to force landlords to effectively give away their product for free, I don’t know where that ends. Can General Motors be forced to give people cars unless they otherwise crowd into subways?”

If they could, the auto industry would suffer the same fate as the housing industry. The eviction moratorium, which applies to 90% of renters, further centralizes the housing market and serves as a national rent control measure—setting the effective price at zero.

Rent control leads to scarcity

The price system in the market economy efficiently allocates scarce resources. It is far easier for politicians and bureaucrats to devise “free lunch” solutions than to get out of the way and allow the market to solve economic problems. If the market were allowed to function, higher rental prices would signal to builders an increased demand for housing. Building more units pushes the prices back down. This is simple supply and demand economics. 

The eviction moratorium, which acts as a form of rent control, ruins the housing market. There will be no new housing construction because there is no incentive to do so. Instead, entrepreneurs who see property owners struggle for months without a rent check will refuse to enter the housing market and invest their money elsewhere. Current owners, who have either significantly reduced profits or no profits at all, will be hesitant to provide more housing units.

The growth in housing inventory has slowed over the last decade, resulting in an “underbuilding gap” of 5.5 million to 6.8 million housing units. Last month, Taylor Morrison CEO Sheryl Palmer told CNBC, “the lack of supply and the overwhelming demand is something that will be with us for years to come.” Morrison added that the new and resale markets are at multi-year lows,” and it will be “very difficult to make up the shortage.” Discouraging potential builders will continue to add to the underbuilding gap, resulting in further housing scarcity and higher prices. 

Neglected buildings

Because property owners cannot evict tenants, renters are incentivized not to pay. Rental property owners pay for the draconian government measures. Without profits, it should come as no surprise then that rental units will start to deteriorate. Repairs are neglected for two reasons: the owner does not have the money to make repairs and get people to move out. Many would rather have no tenant than one that is not paying.

In a properly functioning economy, rental owners reinvest profits into their buildings and property. However, by the time they reach this stage of neglect, it is too late. Instead, these measures often lead to condemned buildings, further decreasing the supply of quality housing. Empty condemned buildings, the result of rent control, and other government regulations are something that we can easily see. 

Property owners will be more selective 

Rent control is intended to help those who are less fortunate. However, single mothers, immigrants, and welfare check recipients often pay the price. Many people are unable to make rent on time–the average renter is behind $3,700. With further uncertainty in the rental market, landlords will be more selective about whom they take on as tenants. 

Not wanting to be left holding the bag the next time, landlords will shift their focus to renting to young people with well-paying jobs, where they know the rent will continue to be paid on time, even during economic slow downs. In the past, property owners have resorted to other methods to avoid low-income renters, such as charging key money (a large deposit for the use of the apartment key), creating waiting lists, and in some cases, outright discrimination.

Not satisfied with the CDC moratorium, Rep. Ilhan Omar wants to forgive the unpaid rent, and fellow squad member Rep. Rashida Tlaib goes even further, introducing a bill to cancel household water, electric, broadband debt. These are short-sighted remedies that begin the cycle of seeking government solutions to problems caused by the government.

The evictions process could take years 

The eviction ban is an assault on private property that will take years to undo. Even if the Supreme Court were to strike down the eviction ban, the process could take years. Josh Blackman, a constitutional law professor at the South Texas College of Law Houston and an adjunct scholar at the Cato Institute, writes,

“Courts will have a massive, 18-month backlog. The clerk will take forever to file the cases, process them, issue summons, provide notice, schedule hearings, etc. Plus, states offer additional ways to challenging evictions based on hardships.”

We need a truly free market in housing that encourages entrepreneurs to build more housing, invest in their property, and allows the profit and loss system to allocate scarce resources properly. The problem in housing and most of the other areas of the economy is not the fault of a market economy. Instead, it is the failure of shortsighted government officials who cater to the needs of one group at the expense of everyone else.

EM