Rent controls make many tenants worse off in the Netherlands

Rent controls have created shortages of housing, every time and in every place that they have been tried. In the latest futile attempt to create working rent controls, the Netherlands has worsened its housing shortage. As Bloomberg reported recently (paywalled, but try this alternative link):

Two years ago, Nine Moraal and her two children moved into a one-bedroom flat near the Dutch city of Utrecht, a comfortable spot close to family and friends. Although she had only a two-year lease, she expected to be able to extend it and stay until she could get one of the Netherlands’ many rent-controlled apartments.

But last spring, her landlord told her she’d have to move out in November, because renting the flat was no longer profitable. Despite “frantic efforts on social media, phone calls, visits to realtors and housing agencies,” the 33-year-old educator says she hasn’t found anything. “The cost isn’t the problem, but a real shortage of housing is.”

Moraal is among the growing number of Dutch people struggling to find a rental property after a new law designed to make homes more affordable ended up aggravating a housing shortage. Aiming to protect low-income tenants, the government in July imposed rent controls on thousands of homes, introducing a system of rating properties based on factors such as condition, size and energy efficiency. The Affordable Rent Act introduced rent controls on 300,000 units, moving them out of the unregulated market...

For the past year, Shahmy Wahabdeen has been renting a house in The Hague for €1,400 a month. After the new rules kicked in, his landlord decided to sell, leaving Wahabdeen scrambling to find new digs for his family of four. “I’m feeling completely hopeless and am seriously considering sending my family back home,” says the 34-year-old software engineer from Sri Lanka. “I don’t know what else to do.”

Coincidentally, I covered rent control with my ECONS101 class in the lecture today. I could see some sceptical faces around the class when I described the negative impacts of rent control on the market, and especially the negative impacts on tenants. However, there is lots of robust evidence on these negative effects, and the Netherlands example is just one more example of how rent controls often fail to help the very people that they are designed to help. A tenant who has nowhere to live isn't going to thank the government for cheap rent.

In fact, my most recent post on this topic was titled "There should be no debate at all about rent controls", and that's because any debate should be over before it begins. When it comes to bad policy, rent control ranks near the top. It certainly isn't a way of fixing the cost of housing. If a government is concerned about the cost of housing, they should build more housing.

[HT: Marginal Revolution]

Read more:

• Why rent controls have worse effects over longer time horizons
• The deadweight loss of rent control
• The deadly consequences of rent control in Mumbai
• Rent control and inequality in San Francisco
• Rent control and the redistribution of wealth
• Rent control and vacant properties in India
• Rent control according to Seinfeld
• There should be no debate at all about rent controls