[EDITORIALS]Rent control won’t work

The Uri Party’s special committee on housing policy plans to revise the current act on leases.
If the revision is made, contracts for leases and rents will hold for three years. Under the current act, such contracts last for two years. Under the new act, landlords will not be allowed to increase leases or rents by more than 5 percent annually. To compel these measures, the party plans to force contracts of leases and rents to be registered at city, county and district offices.
At first glance, the plan seems to be aimed at enforcing tenant rights and stabilizing their housing situations. But however good the intentions may be, government policies that go against market principles will inevitably be met with revenge from the markets.
In this case, the people with low incomes and no houses will have to pay more for leases or rents, or be evicted onto the street, contrary to the government’s goal.
Under the current act to protect tenants, landlords cannot raise leases or rents by more than 5 percent within two years, but they can raise it more for new tenants. The Uri Party intends to prohibit landlords from doing so because the party members have no idea how the market for leases and rents works in reality.
Before the new regulation becomes effective, landlords will hurriedly raise lease or rents. Because they cannot raise them for three years, they will raise them as much as possible while it’s still legal.
Therefore, tenants will need to pay a lot more than they can afford. Some may end up on the street. Leases and rents will surge and the supply for such housing will shrink. That will be a crisis of leases and rents.
We have already experienced such failure and we don’t need to go back very far to find an example. At the end of 1989, the government increased the contract period for leases to two years. Let’s recall what happened then. As landlords realized they could not raise leases or rents for two years to come, they raised them all at once, sending the entire country into chaos.
The Uri Party says that people can file complaints at administrative offices, but that will be after the chaos has begun again.
Unless the government takes over all functions of the market, regulations on prices will not work. When the government cannot offer leases and rents for all who need it, regulations on lease and rent will not successfully control prices.
Such regulations will only make tenants’ already hard life even tougher.