Rent Control: Supply & Demand

Video Transcription

Hey, Travis Daggett with Cornerstone Properties. I’m in Eugene, Oregon, talking again today about rent control and, specifically, responding to Tina Kotek and some of the supposed benefits she said about her thoughtful and reasonable rent control.

“There’s Never Been a Study Showing That Rent Control Reduces Supply” Really?

One of the things that is actually pretty outrageous that she says is that there’s never been a study showing that rent control reduces supply. Now, she’s using, I think this is really a straw man argument or a red herring, because she’s saying that rent control doesn’t actually decrease the number of properties available for rent, or more specifically, she’s saying it doesn’t decrease the supply of properties, period, that are available for somebody. In other words, it doesn’t tear down a house, or something like that. Well, yes, that’s right Tina, it doesn’t tear down a house. You have the same number of houses before and after rent control. Now after rent control, those houses are in much worse condition. We’ll get to that later.

So, really a pretty silly argument, ’cause when we talk about supply and demand, we’re really talking about the way that they interact through the market. So, here’s the truth about supply. Rent control, what it does is it artificially lowers vacancy rates. So, if you have rent control, let’s just say that market rent would be 1500 dollars a month, and rent control caps it out at 850 dollars a month, well you have an insane number of people staying in the rental for 850 dollars a month. Of course, they’re getting a rental at almost half price, so they’re gonna hang onto that any way that they can. Through generations, if they can. So, in that case, vacancy rates are gonna be low, which sounds good as a landlord, but not good when you’re not able to charge enough to make it worth the risk. It just doesn’t make sense.

Rent Control Does Reduce Supply

So, low vacancy rates, what that really means, for tenants or potential tenants, is they can’t find a place to rent. So, yes Tina, that decreases supply, effectively. And it’s forcing an artificial decrease of supply because you’re artificially, again, you’re not allowing the market to work, decreasing the rent. And thus, you’re going to have a very low vacancy rate, but it’s not real. And it actually hurts tenants or prospective tenants the most. So, that’s the first big fallacy, misinformation, in the world of rent control. And the truth about it, it actually does decrease supply. We’ll talk about the next issue in the next video.

Thanks for watching. I’m Travis Daggett with Cornerstone Properties.

Get More Real Estate Market Info... Subscribe Below!

Learn more about us and find other resources on selling your house below. Like us, follow us, connect!

Leave a Reply

Your email address will not be published. Required fields are marked *