Wednesday, August 28, 2024

Argentina's Milei Dumps Rent Control: Rental Housing Supply Triples

Click here to read the original Cautious Optimism Facebook post with comments

A quick follow-up on price controls by the Cautious Optimism Economics Corresponden

As mentioned in last week's longer article, 4,000 years of history has consistently proven that price ceilings (forcing prices below the free market equilibrium level) produce shortages.

So the corollary would be that removing price ceilings increases supply. Is that true?

Well it turns out that Argentina President Javier Milei (who the western press has called a "right-wing fascist") recently repealed his country's rent control laws—a price ceiling on residential rent—and in the months since the supply of Buenos Aires housing available to rent has increased by 195%.

Reason? With the combination of high inflation generated by the Argentine central bank and rents capped by the government, "an estimated one in seven homes in Buenos Aires was sitting empty as landlords chose not to rent them out in Argentine pesos." (Newsweek)

Repealing rent control removed those perverse incentives and landlords have placed units back on the market with a vengeance.

On a side note... in San Francisco, where the Economics Correspondent lives, rent control laws have been in effect for nearly 50 years. It's no coincidence that over 60,000 housing units now sit vacant in a city of 800,000 people with a "housing crisis."

But not to despair, the city government recently added a voter-approved "vacancy tax" (called the "Empty Home Tax") on homes and apartments that remain unoccupied for more than 182 days of the year. The tax now joins multiple bans on housing construction that have suppressed supply since the 1980's and rent control that has taken more of the scarce remaining units off the market.

The beatings will continue until morale improves, and of course the locals routinely blame "capitalism" and "the free market" for San Francisco's decades-long housing woes.

The Empty Home Tax went into effect last year but is being challenged in court.

Read Newsweek's (of all places) story on ending rent control at:

https://www.newsweek.com/javier-milei-rent-control-argentina-us-election-kamala-harris-housing-affordability-1938127

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