alt Hacker News> This paper studies the effects of rent control on the housing wealth of renters, landlords, and homeowners. Over the nine months following the passage of rent control in St. Paul, Minnesota in 2021, average property values fell by 4.4% to 5.8%.
This seems like too short-term a study. The argument against artificially holding prices down is that people won't produce as much as they would otherwise and people won't be able to get the thing they would otherwise buy. So what we're predicting a rent control policy will do is cause a shortage of rental accommodation in the area.
Now how that expresses itself in an accounting sense, who knows (probably the economists). Good question to study. But I doubt the impacts of rent control would appear in the market this quickly, it'd take years for the market signals to be measurable. Initially rent controls will probably be set near the previously ideal market price, I'd guess there are a lot of 12 month leases and housing construction projects probably don't reset that quickly either.
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The plot on page 39 certainly looks like the St Paul market turned somewhere around July of 2020, over a year before the rent control, and the downward trend accelerated over the next couple of years. I'm skeptical of the authors' ability to tease out the contribution of rent control to a process that had already begun well before the alleged causal event.
The key to understanding the effects of rent control is understanding the Law of Supply and Demand.
Artificially holding down rents will result in housing shortages. The lower the rent controlled price, the worse the shortage.
If the rent goes too low, the building owner will stop doing maintenance. Eventually, the building gets abandoned.
> But I doubt the impacts of rent control would appear in the market this quickly, it'd take years for the market signals to be measurable.
Hard disagree. Rational investors have no problem whatsoever projecting the impact to future cash flows and adjusting the amount they're willing to pay now. That's like saying the stock market wouldn't respond quickly to changes in next year's tax law.