Javier Milei has grabbed my attention not only because he is the President of Argentina, but more notably because he is the first libertarian head of state. In January, I was excited about his push to deregulate one of the most highly regulated countries in the world. In February, I got to write about how Milei's austerity created the first budget surplus in Argentina in over a decade. Today, I have the pleasure of featuring another one of Milei's victories, aside from having a 55.4 percent approval rating.
In 2020, Argentina introduced a form of tenant rent control. Aside from requiring tenancies to last a minimum of three years, rent was capped at a weighted average of inflation and wage growth. Deposits were capped and rent had to be paid in Argentinean pesos (ARS). Contract length regulations increased the risk of landlords acquiring troublesome tenants. Landlords forewent expensive maintenance while evictions soared. While the rent cap helped a small number of landlords sell property, the truth is that one in seven housing units laid empty. As a basic microeconomics course would teach, reducing the supply actually increased prices. Rent for a two bedroom in Argentina soared from 18,000 pesos a month in 2019 to 334,000 pesos in early 2024.
To respond to this housing nightmare, one of the Milei's first acts as President of Argentina was to do away with rent control. How has that fared since he enacted that decree in December 29, 2023? The effect on the housing market was immediate. As the libertarian Mises Institute pointed out in April, housing began to rise as prices began to fall. According to an article from Newsweek published last week, the supply of rental housing in Buenos Aires boomed by 195.23 percent since December 2023.
While encouraging, this news hardly came as a surprise. When I first lambasted rent control on this blog back in 2014, I laid out the economics of rent control and showed how rent control constricts housing supply. I brought up the topic again in 2022 when Pasadena passed rent control. This past June, I covered a meta-study on all the harms of rent control, including less mobility, lower quality of rental units because of disincentive to perform regular maintenance, bringing down property value and neighborhood quality, decrease in new construction, and higher rents in the overall market.
Yet Western politicians on the Left rave about it and are attracted to it as palatable, even though economists on all sides of the aisle can agree that it makes for foul economic policy. Last month, I illustrated how Biden's rent control proposal would have screwed over the U.S. housing market. Earlier this month, presidential candidate Kamala Harris embraced the harebrained idea of rent control. Politicians in Europe do not seem to know any better, including Sweden, Ireland, and Germany. As socialist economist Assar Lindbeck once stated, rent control is one of the most effective ways to destroy a building short of bombing it. Argentina serves a fine example of what happens when you remove rent control. What are the odds that other Western politicians will actually listen?
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