Rent control is a policy often advocated with the best of intentions: to make housing more affordable by capping the rent landlords can charge. However, as Henry Hazlitt argues in his book Economics in One Lesson, the unintended consequences of rent control can do more harm than good.

The Immediate Effects of Rent Control

At first glance, rent control appears to be a straightforward solution to high rents. By legally limiting how much rent can increase, tenants are protected from sharp price hikes, and housing is kept affordable for those who need it most. This immediate benefit is why rent control is a popular policy among many.

The Unseen Consequences

However, Hazlitt emphasizes the importance of considering the unseen consequences of economic policies, and rent control is no exception. When landlords are unable to charge market rates for rent, they lose the incentive to maintain and improve their properties. Over time, this can lead to a deterioration in the quality of rental housing, as landlords cut back on repairs and maintenance to save costs.

Furthermore, rent control can discourage new construction. Developers and investors are less likely to build new rental units if they fear they won’t be able to earn a profitable return due to rent caps. This reduction in housing supply exacerbates the very problem rent control seeks to address, leading to a long-term shortage of affordable housing.

The Distortion of the Market

Hazlitt also points out that rent control distorts the housing market by creating mismatches between supply and demand. Tenants in rent-controlled apartments may stay in units that no longer suit their needs—such as a single person occupying a large apartment—because they can’t find comparable rent elsewhere. This results in inefficient use of housing resources, with larger families potentially struggling to find suitable accommodations.

The Broader Economic Impact

The negative effects of rent control extend beyond landlords and tenants. Hazlitt argues that it disrupts the broader economy by reducing the incentives for private investment in housing. Over time, this leads to a stagnant or declining housing stock, which can spill over into other areas of the economy, reducing overall economic growth and prosperity.

Conclusion: The Need for Long-Term Solutions

While rent control may offer short-term relief, Hazlitt’s analysis shows that it ultimately leads to more significant problems in the long run. Instead of relying on rent control, policies should focus on increasing the housing supply through incentives for construction and development, which can naturally bring rents down and improve housing quality. By understanding the full impact of rent control, policymakers can pursue solutions that address housing affordability without the unintended consequences that harm both tenants and the broader economy.