Denver's Mayor Michael Hancock has big plans for turning Denver into a socialist democracy along the likes of Chicago and New York. As all good socialists he sees problems where they do not exist. Also like all good socialists he believes that expensive government programs are the solution to the problems that do not exist. The mayor announced his proposed budget last night and it includes a call for an $8 million taxpayer funded rent control program. Let's consider that for a moment today.
The mayor thinks apartment rents in Denver are "too high," whatever that means. Apparently many of his lackeys in the media agree with him. I was watching a news report on the local news last night when the two pretty air-heads (one was male, one was female but both were quite pretty) announced the story about the rent control program. They furrowed their brows when they talked about what the average rents are in the Denver area. They smiled profusely when they described how the mayor and the city council were meeting that night to solve the problem that does not exist. It was as if there is universal agreement among all the ignorant citizens of the City and County of Denver that rents are "too high," whatever that means, and government must "do something about it," whatever that means.
The average rent for a 900 square foot rental unit in Denver currently stands around $1200/month. That is significantly higher than it was a couple of years ago. Why have rents gone up, not only in Denver, but throughout the entire Denver metro area? The answer to that question is simple. The total number of rental units has remained basically the same while many people have moved to Denver to participate in the robust job growth the city has experienced since the Great Recession. More people seeking to rent the same number of apartments causes the monthly rental for those apartments to rise. Please help me to understand....why is that evil? Why does the law of supply and demand make it necessary for taxpayer money to be spent in what will inevitably be a vain attempt to change what is quite necessarily an inexorably law of economics? Furthermore, why are rising rents a "problem" that government must get involved with? I don't hear any landlords complaining, although I did hear a lot of them complaining about how low rents were a decade ago.
In the absence of government coercion what do you believe would be the free market response to high rental rates? It is not hard to figure out. Capital will be allocated to the creation of new apartment buildings. Profit seeking investors will funnel their resources to an area where profits are currently high and an abundance of new rental units will come on the market in a relatively short period of time. You do not have to drive around Denver for very long to see that this is already taking place. As more units are constructed the price for a monthly rental will most likely either stop rising or, perhaps, decline. The free market can and will solve the nonexistent problem of high rental rates more efficiently and more to the satisfaction of all participants in the market place than any government program ever will. But that does not keep career politicians from embarking upon costly and inefficient housing projects. That alone should prove that government housing projects are more about currying favor and buying votes than actually doing something constructive in the community.
The mayor plans a two-pronged attack upon the housing crisis that does not exist. First he will ask for more taxpayer dollars to construct projects. Then those projects will be rented to politically favored groups, in exchange for their future votes. In a matter of years those projects will go the way of all projects. They will be dilapidated and filled with prostitutes, drug addicts and free market drug salesman. The market value of all real estate around the projects will decline sharply and slums will come into existence. Most likely those things will take place after the mayor has moved on to another political position so he will not take the heat for what he has done. Another politician will then come along and promise to fix the problem by building new, better, more efficient projects at less cost to the taxpayers. That too will fail miserably. In other words, in a generation or two Denver can become just like Chicago or New York.
The $8 million requested by the mayor is to pay rent "subsidies." Rent subsidies are political favors dolled out by career politicians to the people who will perpetually vote for them in exchange for a guaranteed monthly rent check. Many landlords are sucked into this scam as they desire to have a guaranteed monthly rental check without the problems often associated with collecting from deadbeat renters. Potential landlords will line up, hoping to receive their share of the largess. Those that are approved win and the rest of the people who own rental properties will lose. That is the nature of all government wealth transfer scams. They always create winners and losers. The task for the career politician to to keep the winners in the majority of their constituency so they can continue to be reelected.
The other line that will be forming outside of the mayor's office will be made up of people who want to receive subsidized rent. These folks have a strong incentive to stop working, reduce their income and put themselves in the most favorable position to be recipients of the rental payments. Just like the landlords there will be winners and losers. All of those who want some of the government money have a strong incentive to stop serving people around them and get on the government dole as quickly as possible. The beauty of a wealth transfer program like the one the mayor has proposed is that it not only harms the people who actually become entangled in it, it also harms the much larger body of people who desperately want to be entangled within it. Merely stating his wealth transfer proposal has created enormous disincentives for productive behavior among tens of thousands of Denver residents. Well done mayor!