Last week 75% of Chicago voters who were given the chance to weigh in on Illinois' current ban on rent control supported lifting the ban. I guess technically they didn't actually support rent control - i.e. lifting the ban would merely give local governments the option of imposing rent control. However, I have a strong suspicion that they actually like this idea for making housing "more affordable". It sounds good right?
Wrong, as anyone who ever stood in line to get gas during the price controls of the 70s knows. Misguided government efforts to control gasoline prices resulted in catastrophic shortages and subsequent rationing based upon the ending number your license plate. Anyone who had ever taken Econ 101 saw it coming because they knew that you can't legislate the law of supply and demand. If only politicians and voters were required to take that course.
I don't support many of the often self serving legislative initiatives of the various realtor associations but in this case the Illinois Association of Realtors is spot on in their opposition to Illinois HB 2430. I think their bullet points get to the heart of the matter and are worth reading but if you don't have the time here are some of the better arguments against rent control:
- It discourages investment in rental properties. When your rent is limited you are certainly going to invest a LOT less in new construction or the renovation of rental units.
- Lower rents mean lower investment property values and, combined with fewer rental units, means lower property tax revenue for the city of Chicago. Of course, Chicago doesn't really need more tax revenue, right?
- Landlords will be caught in a double bind between restricted rents and rising property taxes. That will further depress prices.
As I've made the case before, artificially lowering the cost of housing doesn't really benefit the intended beneficiaries. Instead it indirectly subsidizes low wage industries by facilitating their access to low cost labor that would otherwise move away and drive up the cost of labor. Then it creates a population that is permanently dependent upon artificially lower housing costs.
Rent control has not succeeded in keeping housing affordable in either New York or San Fransisco. In fact, as I pointed out in this previous post real estate investors in New York actually love rent control and it ultimately drove up the cost of housing: Chicago's Affordable Housing Quagmire About To Get Deeper. If this is what Chicago voters want then I guess they will ultimately get what the deserve - the destruction of Chicago's rental housing stock.
#ChicagoRent #RealEstateInvesting #RentControl
Gary Lucido is the President of Lucid Realty, the Chicago area's full service discount real estate brokerage. If you want to keep up to date on the Chicago real estate market, get an insider's view of the seamy underbelly of the real estate industry, or you just think he's the next Kurt Vonnegut you can Subscribe to Getting Real by Email using the form below. Please be sure to verify your email address when you receive the verification notice.