Funny How Nobody Wants Rent Control When Rents Are Falling

Two years ago, in the throes of a housing shortage driven by the Bakken oil boom, the Williston Herald called for rent control in an editorial.

“It has been well-established that rent control is illegal in the state of North Dakota, but it is also gaining momentum from residents and activists seeking change,” the paper wrote. “It may be time for the state to step outside of its comfort zone in the way many of its residents have been forced to do. It may be time for the state to think outside the box and consider some sort of rent control to support its long-time residents until the market is reeled back to reality.”

There was also a Democratic candidate for the Legislature from the Williston area who made rent control part of her campaign platform, though she ultimately dropped out of the race before election day. Also, rent control policies were never instituted.

[mks_pullquote align=”right” width=”300″ size=”24″ bg_color=”#ffffff” txt_color=”#000000″]Demand for housing has, like drilling activity, fallen off a cliff and rents have followed. These days it’s not rent control the city is contemplating but rather the reduction of competition in the housing market.[/mks_pullquote]

Things are different in the oil patch now. Demand for housing has, like drilling activity, fallen off a cliff and rents have followed. You think maybe the landlords in Williston would like some rent control now?

They’re actually engaged in similar sort of rent-seeking. Only it’s not rent control so much as tenant control, I suppose.

The Williston City Commission is continuing its push to drive companies operating temporary worker housing facilities – you know them as “man camps” or “crew camps” – out of their community, with the assumption that the displaced workers will rent the apartments or buy the houses which are currently sitting empty. While a federal judge issued an injunction against a previous ordinance closing down the crew camps operating in the city’s jurisdiction, commissioners have passed a new ordinance they expect to take effect in September doing the same thing.

This is as much a folly as rent control would have been. In fact, all such interventions in the marketplace are ill-advised.

Rent control, at the peak of the oil boom, would only have served to slow the development of more housing. “The analysis of rent control is among the best-understood issues in all of economics, and — among economists, anyway — one of the least controversial,” wrote Nobel Prize-winning economist and left-wing celebrity columnist Paul Krugman for the New York Times in 2000. “In 1992 a poll of the American Economic Association found 93 percent of its members agreeing that ‘a ceiling on rents reduces the quality and quantity of housing.’”

This is logical. Housing developers are going to be reticent to offer their services in a market where what they charge for their product is severely limited and treated like a political football.

On the flip side, driving crew camps out of Williston promotes a similar market distortion. In a community like Williston where the local economy is driven by the always volatile oil markets what the market needs is flexibility. Removing an entire category of housing like crew camps, which cater to workers who need a level of housing somewhere between a motel room and an apartment, removes flexibility from the housing market.

This will inevitably result in housing developers building permanent types of housing – single family homes and townhouses and apartments – to meet what is often temporary demand.

It’s ludicrous. All the more so because the truth market is staring us directly in the face.

In Minot, on the eastern edge of the oil patch, the Minot Daily News sees the free market at work. “Many people today express the idea that the free market doesn’t work the way that it should,” the paper writes. “Those people should have a look at the Minot apartment rental market.”

Indeed, and not just in Minot either.

This is why policymakers need to be reticent, not reactionary, when it comes to flexing the muscle of government. Whether it be to control spiking prices or to shore up flagging demand.