Among the most troubling of Harris’s proposals are her calls for a national rent control scheme and the prohibition of pricing algorithms that help landlords set rents based on market conditions.
Here are some fundamental truths about economics that politicians won’t tell you.
First, bad monetary policy causes higher prices, not greedy businessmen or landlords.
Second, when the government creates inflation, politicians foolishly often try to stem its damage through price controls.
No matter how hard and how often they try, politicians cannot repeal the laws of economics. Like gravity, supply and demand govern human actions and the marketplace, dictating prices based on availability and desire.
From ancient Rome to today’s proposals from Democratic presidential nominee Kamala Harris, policymakers seem intent on defying these fundamental truths.
It has been almost 3,000 years since the Code of Hammurabi explicitly set Babylonia’s costs of goods and services in law. Historians note that the law failed as merchants took their business elsewhere.
Two thousand years later, the Romans also attempted to set prices of goods and services into law when Emperor Diocletian faced massive inflation and passed his Edict on Maximum Prices. Meat, eggs, and grains were subject to a government-set price, and anyone violating the law faced death. Merchants responded as expected; they shifted their goods to other markets, and shortages became common.
It’s expected that there would be examples in history of experiments with bad policies. One would just hope that four millennia of repeated failure would deter modern politicians from doing the same. Yet here we are.
The latest iteration of this backward thinking comes from Kamala Harris’s economic platform.
After overseeing debilitating inflation as part of the Biden administration, Harris is now advocating for policies that will exacerbate the problem rather than solve it.
As inflation eats away at the savings and livelihoods of the American people, Harris and her allies ignore the core issue: government-induced inflation.
Among the most troubling of Harris’s proposals are her calls for a national rent control scheme and the prohibition of pricing algorithms that help landlords set rents based on market conditions. These proposals are reminiscent of price control efforts throughout history, and the outcome will be no different.
While politically popular in faculty lounges and editorial board meetings, rent control is notorious for creating housing shortages, reducing the quality of available housing, and discouraging new development. The more Harris pushes these proposals, the worse the housing crisis will become.
In places like New York, San Francisco, and Los Angeles where rent control laws have existed for decades, rather than improving affordability, these laws have made housing scarcer and more expensive for the vast majority who are unable to obtain a rent-controlled project (shortages develop quickly when the government forces costs below market value). It should come as no surprise that these three cities remain on the list of the most expensive places to rent in America.
Property owners, constrained by artificial rent caps, have little incentive to maintain or upgrade their properties, leading to a deterioration in housing quality. New development, which is sorely needed to meet demand, is often stifled as developers fear they won’t be able to make a return on their investment. Some even take apartments off the market and convert them to condos to avoid the price cap.
Harris’s desire to ban the software landlords use to analyze market conditions is another misguided attempt to interfere with basic economic principles.
Software isn’t responsible for high rents—it’s only responsible for making market conditions more apparent to everyone.
If a landlord attempts to price their units too high, the software suggests a decrease in pricing. That is why Dallas and Phoenix have lower rental prices than in California’s largest cities, even though Dallas and Phoenix have more landlords using algorithms. Algorithmic software’s interest lies in supply and demand curves, not price gouging.
Banning these tools will not lower rents; in fact, doing so would create more inefficiency in the rental market, further distorting prices and worsening the housing crisis. Sort of like breaking your thermometer because the weather is too hot or too cold.
There is another Harris proposal that would be a death knell for renters. She supports a tax on unrealized capital gains. That means if you purchased a home to rent, and the value went up, you would be forced to pay a tax on the increased book value, even if you didn’t sell. Very few would invest in real estate if faced with such a punishing tax.
Like many politicians before her, Harris’s economic proposals fail to recognize the root cause of inflation: government money printing. When governments flood the economy with excess money (which is exactly what the Federal Reserve did a few years ago), that’s a recipe for rising prices. Rather than address this imbalance, Harris and her allies are doubling down on policies that worsen matters.
If history has taught us anything, it’s that price controls are not the answer to inflation. From Babylonia to ancient Rome, from 1970s America to today’s housing market, the lesson is clear: when governments try to set prices, they create scarcity, lower quality, distort the natural balance of supply and demand, and cause consumers to suffer. If price controls had worked, Cuba and the old Soviet Union would have been economic paradises rather than basket cases.
You can’t repeal the laws of economics, no matter how many times you try.
It’s time to learn from history, not repeat its mistakes.
