We have a lot of mods now. Don't be afraid to disagree with ones besides Wumbo.
Text being RI'd:
Rent control makes the housing situation worse for the poor.
Is this true? I'd agree that rent control make the housing market less efficient. But one could certainly argue that the comparative statics would yield an increase in consumer surplus. I'm not aware of any studies that have tried to measure that.
and the pm:
Basic comparative statics implies that rent control can increase the welfare of the poor via the increased consumer surplus. See the first figure in the Glaeser paper you linked.
Theoretical argument:
The user argues based off theory, so I'll first refute him with theory.
Is this true? I'd agree that rent control make the housing market less efficient. But one could certainly argue that the comparative statics would yield an increase in consumer surplus.
The argument that the user is making is that, given the supply and demand figure for rent control, the area of consumer surplus gained, which is equal to [; \Delta * Q ;] in that image, will be greater than the consumer surplus lost as part of deadweight loss (upper half of the area [; ABC ;]). The context of this argument is about rent control's efficacy as a policy to help the poor afford homes.
In pursuit of making housing more affordable and available, this is wrong because rent control reduces the quantity of housing available. Now, think about what it means to say that reducing the quantity of housing and hoping that the consumer surplus gained will be enough to have a net benefit to consumers. This, in real life terms, is equivalent to saying that it's worth making some people homeless because whoever is left with a house or apartment will be able to get a really good deal on their rent. Additionally, I said hoping, because this requires the surplus gained to be greater than the surplus lost, which may not always be the case. So, even if you think this is economically or even morally sound, it's not even a guaranteed outcome.
By definition of the problem, we know that the issue is not enough housing. People say this is because housing is too expensive, which is true. However, it's very clear that rent control does not increase the quantity of housing available, so it's ineffective at accomplishing its goal. In no way does transferring the availability of housing to a smaller segment of the population and then having them pay below FMW actually help poor people acquire housing. Even if there is net positive consumer surplus, even if everything goes the way the user imagines it will (in reality, the housing left doesn't even end up with the poor sometimes), this "solution" just makes the problem worse. Further, more in-detail explaination of why.
Empirical argument:
Here's the good part everyone. If you're still awake, you're in for some fun.
Right at the end of the first comment, the user says:
I'm not aware of any studies that have tried to measure that.
and in a pm, he says:
Basic comparative statics implies that rent control can increase the welfare of the poor via the increased consumer surplus. See the first figure in the Glaeser paper you linked.
Now, if you actually read the paper I linked, it was about refuting the outcomes of the first figure with empirical evidence. In fact, even if you only like "reading" pictures, the figure a page after the one the user mentions shows where the first one goes wrong. Both these figures are from this paper, pages 1028 and 1029. Here's an excerpt from the conclusion of the paper:
Theorists have long been aware that wage and price controls may casue the misallocation of goods. However, this insight has, so far, both failed to create an empirical literature or even to penetrate into most economics textbooks. Indeed, one of the most famous diagrams in economics is, in fact, wrong if the rationing under shortages does not always allocate goods to the consumers who value them most. Indeed, by ignoring allocation problems, economists ignore one of the primary glories of the price mechanism: it allocates goods to the consumers who value them most.
And, similar results have been noted in another paper.
Regarding the distribution of these houses, here's a table on the household characteristics from the first paper. The income per capita, under household characteristics, is almost the same between the control cities without rent control and with. Another table shows similar results and explicitly mentions the distribution of rent-controlled housing versus free-market housing among income groups. The author writes the following:
In Table 2, we see that in New York (a high-price city) the connection between income and housing consumption is weaker than elsewhere. If we thought that higher prices in New York changed the relationship between income and housing consumption because higher prices differentially increased the marginal utility of income for the poor, then we would expect the income-housing relationship to be stronger in New York, not weaker. As such, the differential relationship between housing consumption and demographics in New York does not seem to occur because the marginal utility of income is rising particularly for the poor in a high-cost area.
And, from Table 2, we can see that rent-controlled housing is a 1:1 split between the lower and middle/upper class. This is the same ratio as between free-market renters of different income groups. This is evidence that, even if a positive net consumer surplus is created (which may or may not have happened), it may not go to the poor for whom the policy is directed.
Lastly, in case of inevitable ad hominem
Oh and here's the thread along with the PM response of clarification.
ここには何もないようです