What was the difference between rent controls on apartments and price controls on gasoline? In the rent control case, current tenants are insiders. They don’t have to line up for an apartment. So, as noted above, most of them will favor rent control.
In the gasoline price control case, though, everyone (unless they had a special deal with the service station owner or manager, as sometimes happened) had to line up. The fact that you managed to get gasoline last week gave you no special place in line this week. So, there aren’t many “insiders” to lobby for the gasoline price controls.
That raises an interesting possibility for ending rent control. What if the rent control regulations gave no existing tenants the preferential treatment that the current regulations give? Once a tenant’s one-year lease was up, his claim on the apartment he currently occupies would be no stronger than the claim of a want-to-be tenant. That one change in the regulation would dramatically change the political dynamics of rent control. There wouldn’t be insiders. Of course, current tenants would lobby like crazy against that regulatory change.
This is from David R. Henderson, “Rent Control Creates Privileged Tenants,” Defining Ideas,” May 15, 2025.
I taught the point of this article in my class for many years. I had never seen it stated clearly in textbooks. So I decided to write it up.
I recommend the article for economics professors and teachers for when they teach about price controls.
READER COMMENTS
Jon Murphy
May 16 2025 at 8:08am
Very interesting. I hadn’t thought about the differences in popularity of the two price controls, but it makes sense.
But does the continued popularity of price gouging legislation following a pose a problem here? Those are another case where there aren’t insiders, yet they tend to be popular legislation.
David Henderson
May 16 2025 at 9:30am
Thanks, Jon.
You ask:
Good question. I don’t think it does pose a problem because I’m not trying to give a slam dunk explanation for the durability of price controls. I’m arguing, more modestly, that the difference in structure of the price controls is an important factor. I do think that if price gouging laws were enforced for years and were causing shortages for many goods, they would be easier to get rid of than rent control laws, which, as noted, have existed in NYC for over 80 years.
Craig
May 16 2025 at 9:58am
World Series televised in 1970s sees Howard Cosell remark ‘the Bronx is Burning’ as the smoke of a fire coukd be seen beyond the confines of Yankee Stadium. Fueled in no small part due to rent control, many buildings were worth more burned thab to continue on collecting the rent roll. In any event I agree many tenants are insiders the thing they will see will be landlords not taking care of amenities, making repairs or not making repairs in a timely manner.
I believe Professor Murphy os a Red Sox fan and a baseball fan generally and this event could be a bit before his living memory but if so definitely search for it on YT.
Craig Richardson
May 16 2025 at 11:32pm
David,
I read the entire piece and really enjoyed the clarity of the insider/outsider issue with rent control. I see a very similar situation with zoning and how the insiders oppose any zoning change that brings in property that has lower value than their home.
A favorite quote of mine by Lester Thoreau was something like- “the man who desires his cabin in the mountains has the mind of the developer, but after he gets his cabin he becomes an environmentalist.”
Knut P. Heen
May 21 2025 at 5:55am
It is also important to stress the large group of people who are indifferent or slightly in favor of the issue.
With rent control: Cannot get an apartment because it is occupied until someone dies.
Without rent control: Cannot get an apartment because it is too expensive.
For this group, it is rational to slightly favor rent control because you may be lucky. It is a lottery ticket paid by someone else.
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