Is building more homes not enough? Recently, there have been more and more Gen-Z memes about boomers selling their overvalued houses to Blackrock instead of to young couples, and then the corporation rents the house to the couple for 2x the price. The housing crisis is not a false alarm. The median rent price went up 25 percent in just 6 years. This is a serious economic problem for America.
Many young people are already being radicalized by this, as they are willing to elect socialist Zohran Mamdani—who called for abolition of private property once—as the mayor of New York City. But what can we do? Are rent controls now relevant, as globalization and financialization changed the rules of the game? Can European-style social-democrats like Mamdani, Bernie, and AOC control the markets elegantly enough to maximize supply?
Only two percent of economists support rent control. But economists, especially mainstream ones, can be wrong quite often. This time, however, they are right. Price controls discourage new supply and exacerbate shortages. Lack of price signals lead to mismanagement of resources, because developers can’t see where houses are needed the most, so developers and landlords have no incentive to rent there, leading to lack of housing which eventually leads to higher prices and lower vacancy rates.
If rents are allowed to increase freely, they would initially go up in certain areas, incentivizing developers and landlords to provide more housing options. This will lead to increased competition and, therefore, falling prices.
Examples of this can be seen all around the world. In California, after the introduction of rent controls in Berkeley and Santa Monica, rental units decreased 8 and 14 percent respectively; in Boston and Brookline, by 12 percent. Housing construction fell by 80 percent in St. Paul after rent control was introduced. Companies were disincentivized from providing rental units, as they felt the reward was not high enough.
In Britain, after rent control was introduced, the share of private renting on the housing market decreased from 50 percent in the 1950s to 8 percent in 1988. Dublin provides another example. The average Dublin resident spends 50 percent of his monthly wage on rent, even though Dublin has one of the strictest rent control laws in Europe, where there are RPZs where rent cannot be pushed up by more than 2 percent a year.
Addressing the plan of Mr. Mamdani specifically, a similar rent freeze was implemented in the Netherlands. The proposal was much more moderate than what Mamdani wants in New York. But even this small-scale freeze led to the housing shortage increasing from 400,000 to 453,000. Thus, it would be fair to say that there is no evidence that rent controls were effective at actually pushing down rent prices anywhere on the globe.
New York specifically does not have a great history with rent control. The highest population density and raw population in Manhattan was achieved in 1920. Following that, the first housing regulations were introduced. Since then, population density decreased by 33 percent and population decreased by 600,000 people from 1910 to 2020.
But maybe the game is different now? Proponents of rent control argue that conventional wisdom does not apply now, as they claim that the main driver behind the current housing crisis is not individual landlords, but corporations. Let’s test their arguments empirically. If it was true, then the repeal of rent control would lead to higher rent costs and would not impact housing construction.
In reality, that does not happen. In 2020, President Albuente introduced rent control in Buenos Aires, mandating payments to be made in pesos, limiting rent increases to once a year and factoring in inflation and wage growth. This led to a 140 percent rent price increase from 2020 to 2023. After assuming power in December 2023, president of Argentina, Javier Milei, repealed rent control in Argentina. The housing supply increased by 195 percent from December 2023 to August 2024 and prices fell by 40 percent.
Another obstacle in the way of the builders is zoning laws. In many cities, you need approval—not just from the city officials—but from your neighbors too. This leads to a situation where others can choose whether you can build a home or not. This is an inherent conflict of interest, as property owners have an incentive to minimize housing construction in order to drive up the price of their home.
For example, Dallas, which famously has very loose zoning laws, had real rent prices go down by 10 percent since 2022, despite a huge influx of migrants from states like California. Why is that? Corporations do not own as many homes as you might think they do. In the US, only 1 in 10 apartments are owned by corporations. Only 3 percent of rental property is controlled by institutional investors (those who own over a 100 homes). This metric is only 12.4 percent for large metropolitan areas. This just isn’t enough to cause massive price spikes.
Housing investment is wrongly blamed for skyrocketing prices worldwide. For example, Portugal saw housing prices increase by 17 percent in Q2 2025 alone. Many blame foreign real estate investors who use the popular “golden visa” program but they only account for 3 percent of housing transactions. The root of the problem is overtaxation and overregulation. The country needs 150,000 homes, but—due to high VAT, strict zoning, and rent control disincentives—developers can only build 28,000 homes this year.
We will never solve the housing crisis until we realize that the true cause is not investors or entrepreneurs, but inflation, restrictions, and regulation. If we want affordability, we need more freedom to build, not more controls that scare away builders. You cannot legislate affordability by decree. Only abundance, not regulation, can make housing truly affordable.
