The lesson never learned: rent control
Topics: Housing
06 Dec 2007
From: Ervan Darnell
George Bush [1] is working hard at making HRC [2] look acceptable by proposing the same bad bailout plan she is: price fixing mortgage rates in the form of delaying ARM terms. This is nothing but rent control for home owners. The economic problems with it are almost the same. The long-term effect will be to hurt both lenders and high-risk borrowers. 50 years ago Henry Hazlitt wrote a nice little book called Economics in One Lesson. It's now online. It has a chapter on rent control [3]. It's short and worth reading, still very relevant.
Meanwhile, CATO had a nice piece today on how government restrictions on housing are partly responsible for the mortgage bubble [4].
>If planning laws hadn't boosted median housing prices to several times median family incomes, few homebuyers would have had to resort to sub-prime mortgages.
>
>[...]the housing bubble really only affected a dozen states. In the remaining states, increases in housing prices were relatively modest. While housing prices grew by more than 130 percent in California and Florida from 2000 to 2006, prices in Texas grew by only 30 percent. With few exceptions, the states that saw the biggest bubbles were ones that had passed growth-management planning laws. And with one exception, every state that has passed such a law also saw a housing bubble.
In other words, the government created the problem, then moved in with price fixing to cover up its own original failure.
[1] http://news.yahoo.com/s/nm/20071206/pl_nm/usa_subprime_dc_17;_ylt=AkEKHY6fVvzj0rHA7Ak4vaYE1vAI
[2] http://www.reuters.com/article/companyNewsAndPR/idUSWBT00802820071205
[3] http://jim.com/econ/chap18p1.html
[4] http://www.cato.org/pub_display.php?pub_id=8833
====================================================
Ervan Darnell
ervan@kelvinist.com http://www.kelvinist.com
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