Biden-Harris Plan to Drop Rent Prices Is About to Backfire: Sowell Predicted This Decades Ago
Few figures in conservativism are more revered than Thomas Sowell. A free-market economist, social theorist and philosopher, Sowell’s work has spanned decades and influenced generations.
Sowell wrote a nationally syndicated column, authored dozens of books and dazzled television audiences time and time again with his common sense, anti-intellectual approach to political and cultural issues.
The following story is part of The Western Journal’s exclusive series “The Sowell Digest.” Each issue will break down and summarize one of Sowell’s many influential works.
The Biden administration’s plan to tamp down on rent prices is only going to make things worse.
If only President Joe Biden and Vice President Kamala Harris would’ve read more Thomas Sowell before entering the White House, both would know that rent control tactics invariably harm renters the most.
The Biden administration first announced its rent-control plan back in July, as reported by Forbes.
The plan’s key feature is to force certain landlords to cap their rent increases on existing units at 5 percent.
Any qualifying landlord who refuses the measure will lose tax breaks that the industry has come to rely on.
The Biden administration’s mistake here stems from a fundamental misunderstanding of what prices are.
Prices are not merely an arbitrary number driven up by greed and down by generosity.
They are a reflection of operating costs, consumer demand, scarcity and many other factors.
Rent hasn’t gone up recently because, all of a sudden, landlords have become far more greedy.
It has gone up because rampant inflation — let’s call it Bidenflation since it’s caused by rampant, unchecked Biden administration spending — is causing costs to go up astronomically.
As Sowell noted nearly two decades ago in an Op-Ed, when the government forces price changes, the underlying problems that caused those prices to rise in the first place don’t just go away.
“Prices are not just arbitrary numbers plucked out of the air or numbers dependent on whether sellers are ‘greedy’ or not. In the competition of the marketplace, prices are signals that convey underlying realities about relative scarcities and relative costs of production,” Sowell wrote.
“Those underlying realities are not changed in the slightest by price controls. You might as well try to deal with someone’s fever by putting the thermometer in cold water to lower the reading.”
So then, what might be the cost of forcing price controls in such an unstable economic environment?
The answer is simple, according to Sowell.
By preventing landlords from recouping the high costs of inflation by raising their prices, government price controls simply make renting too expensive.
So, fewer new rental units are built, and though some prices remain low, the housing supply either stagnates or decreases, leaving less housing to go around.
“[I]n rental housing markets … rent control laws have kept the rents too low to build and maintain rental housing. Whether in Europe or America, rent-controlled housing is almost invariably older housing and more deteriorated housing,” Sowell wrote.
“Costs don’t go away because you refuse to pay them, any more than gravity goes away if you refuse to acknowledge it. You usually pay more in different ways, through taxes, as well as prices, and by deterioration in quality when political processes replace economic process.
“But the lure of the free lunch goes on.”
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