Paul Krugman on Rent Control

Paul Krugman has consistently stated that the analysis of rent control is among the best-understood and least controversial topics in economics, often citing the 1992 American Economic Association poll where 93 percent of members agreed that a rent ceiling reduces the quality and quantity of housing. He argues that artificially compressing rents increases demand while simultaneously reducing the quantity of rental units offered, often leading to predictable adverse outcomes like sky-high rents on uncontrolled apartments and a fear among landlords of extended controls, thus stifling new construction.

His position is often framed against the backdrop of housing shortages, where he asserts that crude rent controls worsen the scarcity problem by skewing incentives against new investment and construction. While acknowledging that modern forms of control are more moderate than historical ones, he suggests that any measure suppressing the price message without increasing supply ultimately harms broader affordability. He implies that if society wishes to provide social insurance against rent increases, a direct government subsidy or tax credit would be less economically distortionary than controlling prices for a lucky few tenants.