Javier Milei Has a Housing Lesson for Zohran Mamdani
Mamdani’s face is fresh. His ideas? Not so much—and they have a record of failure.
Last fall, the Wall Street Journal reported on the “rental market boom” sweeping Argentina’s capital.
“Landlords are rushing to put their properties back on the market, with Buenos Aires rental supplies increasing by over 170%,” the newspaper reported. “While rents are still up in nominal terms, many renters are getting better deals than ever, with a 40% decline in the real price of rental properties when adjusted for inflation since last October.”
Several other outlets also reported Argentina’s skyrocketing housing supply and falling prices. The boom was not the result of a government program, but the elimination of one. In December 2023, shortly after winning the presidential election, Javier Milei scrapped Argentina’s rent control laws by presidential decree.
For several years, Argentines had lived under some of the strictest rent control policies in the world — a legacy of President Alberto Fernandez, who in 2020 passed a law that mandated minimum lease terms of three years and allowed rents to rise only at a fixed annual rate set by the central bank. Instead of “stabilizing” rent prices, it sent them skyrocketing.
The scenario might sound astonishing to people unfamiliar with economic history. The government program designed to make housing affordable caused great harm instead. Alas, this is the legacy of price controls, which have been wreaking havoc on humans since before the Code of Hammurabi.
Rent control is a particularly pernicious form of price control, economists have long noted.
“In many cases,” Swedish economist Assar Lindbeck famously observed, “rent control appears to be the most efficient technique presently known to destroy a city — except for bombing.”
Despite rent control’s poor record, the policy is employed in more than 300 U.S. municipalities, including America’s largest city: New York City.
New York is a labyrinth of rent control regulations, which helps explain why housing affordability tops New Yorkers’ concerns this election season.
“Six in ten report having trouble meeting basic financial needs, while 78 percent say that housing costs have worsened in recent years,” writes Josh Appel at City Journal, “and 42 percent cite housing as their top concern.”
New Yorkers have a right to be concerned about housing costs. According to Zillow, the average rent in Gotham is north of $3,700, well above the national average. High housing prices are a common phenomenon in cities with rent control laws.
Unfortunately, New York voters appear to want more of the very policies, such as rent control and restrictive zoning, that have helped drive prices higher by choking off new supply.
In June, 33-year-old Zohran Mamdani cruised to victory in New York City’s Democratic mayoral primary.
Mamdani is no typical Democrat. A self-described socialist, he ran on a platform of government-run grocery stores, universal childcare, and … rent control.
“I’m freezing … your rent as the next mayor of New York City,” Mamdani declared in one campaign video. “Landlords are doing just fine.”
As Mamdani pointed out, New York City mayors often back short-term rent freezes on the city’s roughly 1 million rent-stabilized apartments. But Mamdani is promising to go further, vowing to overhaul the Rent Guidelines Board and install members who will lock rents in place for his entire time in office.
Mamdani has a fresh face, but his ideas are not new. In Basic Economics, Thomas Sowell provides copious examples of rent control policies backfiring on governments throughout the 20th century. A few examples Sowell cites:
Melbourne, Australia: Not a single housing unit was built for nine years due to destroyed profit incentives following stringent rent control.
Santa Monica, 1979: Building permits plunged 90% in a few years after rent control took effect, as builders were disincentivized from building new dwellings.
Washington, D.C., 1970s: The housing stock fell from 199,000 to under 176,000 as landlords pulled homes off the market due to price caps.
Countless other examples can be found, and each illustrates a fundamental truth: Politicians can cap prices, but they can’t eliminate an enduring economic reality: scarcity.
“The first lesson of economics is scarcity,” Sowell wrote. “There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.”
That’s exactly what Mamdani’s rent freeze would do in New York: ignore the reality of housing scarcity and destroy the incentive to build more of it, which is the only real solution to the housing crunch.
If New Yorkers want to make a bad housing crisis worse, rent control is a proven way to do it. Just ask the people of Argentina.
This article originally appeared in The Washington Examiner.
Scariest words ever spoken by man: I’m from the government and I’m here to help.
There is no fact-based defense for rent control. It is a short term political play to purchase the votes of renters who live in high demand neighborhoods, and it dooms those neighborhoods to decline and blight.