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« Caucus Night | Main | Romney Drops Out »

Meanwhile, Back at the Ranch

You know, if the Democrats actually cared about the homeless as something other than a political bludgeon, they'd stop trying to create more of them.

Just as New York is phasing out a 60-year experiment in rent control, Democrats on the House Committee for Local Government are proposing to let local governments here try it. I know it's a basic principle of history that nobody ever learns anything, but really, people, nobody's memory is that short.

As with most populist measures, predicated on the notion that I can get the government to get someone else to pay my bills for me, this scheme would only prolong the pain. By keeping rents down, mortgages would have to decline more to reach the historic averages. And with more people selling, and fewer places for them to move into, well, they'd either have to move farther out, or find a bridge with indoor plumbing.

All together now: subsidies create surpluses, price controls create shortages. There's no shortage of gasoline, because the price floats. There is a shortage of gasoline at $1 a gallon. There's also a shortage of bread at 10 cents a loaf, and Maseratis at $5000. Rent controls create housing shortages, because developers aren't willing to build as many apartment complexes when they'll make less money on them. Rent controls reduce the return on such a project, and make other projects more attractive by comparison.

There's never a good time for this sort of intervention, but right now, what's driving it is the number of foreclosures, and thus the number of people involuntarily entering the rental market, driving up rents at the same time that housing prices fall. Now one way to measure how out of whack the housing market had gotten is to compare rents to mortgages. Nationally, mortgages were 43% higher than they should have been, given historical averages. So some combination of house price declines and rent increases is necessary to get the market back into whack.

The irony is that, as bad as things are here compared to 2006, they're not that bad compared to the rest of the country, contrary to what you might have read. The Wall Street Journal shows that Denver's housing inventory actually decreased 3.8% compared to last year, one of only two markets to show a decline. We have 5.7 months supply on hand, tied for fourth-best in the nation, and prices declined a modest 1.8% year-over-year (6th-best nationally, with the 3rd-lowest decline). Denver's 3.71% delinquency rate is below the national average of 3.98%.

All of which means that, while there might seem to be enough of a glut now to absorb any price controls, in fact, we're likely to start feeling that pain a lot sooner than we think.

Even the bill's prime sponsor, Rep. Weissmann, admits that rent control is a "failed economic policy," but puts forth his measure as a nod to local zoning control. But every Democrat on the committee voted for it, save one (who's married to a landlord and developer, so she rightfully recused herself). Makes you wonder exactly what political forces pushed the House leadership to bring this thing to committee.

Progressively more intrusive. Progressively more expensive. Progressively more restrictive.

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