The Maker of Shortages
lower than the cost of maintaining the properties, including the services that go with tenancy, the law in fact orders the owner to dig into his pocket to make up the deficit. That amounts to commanding him to make a present of his capital to the renter. To avoid that consequence, and to keep within the law, he cuts down on the service implied in the lease as well as on the repairs necessary for the upkeep of his property. Assuming that there is no collusion between the renter and owner to evade the law, the renter does pay less than the market price of his space, but he also gets less: less heat, less paint, less plumbing repairs, less cleanliness, less elevator services, and so on. Thus, rents are controlled on the statute books only.
Rent controls have the effect of continuing and increasing the shortage of houses which brought on the controls. For builders are reluctant to invest their capital in the construction of houses which, because of the controls, will not yield a return equal to costs or equal to what a like investment in some other line would yield. It is a well-known fact that very few houses, far fewer than are needed, have been erected in France since it instituted rigid rent controls after World War I. That is to say, the State's forays into the market place, in the interest of the "general welfare," invariably work to the disadvantage of Society.
The ingenuity of the State in taking advantage of every contingency to promote its own business, which is the accumulation of power, is illustrated in the way the American political establishment met the scarcity aggravated by its rent-control venture. Seeing that rent control did not control but rather worsened the housing shortage, and being reluctant to admit its error, it supplemented control with subsidization. It subsidized builders, it subsidized bankers who made loans
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