Last week, a transition team convened by new Chicago Mayor Brandon Johnson released a 223-page transition report titled “A Blueprint for Creating a More Just and Vibrant City for All.” Needless to say, it is a train wreck.
I have previously explained how its section on public safety would do nothing but exacerbate Chicago’s crime problem. But that is far from the only terrible section of the report. The housing plan it laid out is also particularly bad.
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Rather than addressing high housing costs through incentivizing the construction of new housing —which would raise supply, thus lowering prices and making housing more accessible — it outlines a top-down scheme that will inevitably worsen the city’s housing environment.
Some of the recommendations include: Raising taxes on high-value properties, ensuring no homeless person will ever be asked to leave a location unless permanent housing is available, providing long-term subsidies for those who may be evicted, increasing affordable housing funding, instituting rent stabilization (ie. rent control), prohibiting “discrimination” on the basis of criminal history, and performing multiple “racial impact assessments.”
There is a lot of talk about extra funding for “X” and starting program “Y.” And while some spending on housing vouchers makes sense, large government programs — and especially public housing and rent control — cannot be the centerpiece of a workable and effective housing policy plan.
A look at the recommendation for rent control illustrates why.
In short, significant research shows that rent control disincentivizes the construction of new housing, which creates housing shortages and actually ends up causing prices to rise. A real-world example: In the six months after St. Paul, Minnesota passed a rent “stabilization” ordinance in 2021, permits for new housing projects declined by 84% — from 2,180 permits down to 352 — relative to the same period during the prior year. It got so bad that the city council ended up repealing the most important parts of the ordinance only a few months after it went into effect.
If rent control causes a shortage, one may ask, then why can’t the city just fill the gap created with government housing? The answer is that, no matter what, the housing market will be a reflection of the supply and demand on the ground. There is no reason to think that government housing, which is notoriously expensive to build and maintain relative to privately built housing, would be able to efficiently construct and then actually maintain enough units.
Cutting the red tape which is preventing more housing to be built right now is a far more straightforward way to address the problem. Those companies will continue to build housing as long as there is reason to believe people will occupy it — which makes them money and makes housing more accessible to more people. In other words, there is a reason almost zero economists support it.
Additionally, taking the government-intervention line of thought to its logical conclusion would suggest all housing ought to be government built and funded, and that people who build housing should all work for the government rather than private companies. After all, one can argue, any private housing means there will be a price associated with it, which is inherently prohibitive.
The issue, of course, is that centralization fails both empirically and philosophically.
Central planners do not know how to allocate resources better than those actually on the ground. Unintended negative consequences are inevitable when one buys into the misguided notions of the fatal conceit, to use the phrase of economist FA Hayek. Additionally, both individual studies, as well as sweeping literature reviews, show that rent control is an imprudent policy. Studies also show that removing unnecessary zoning laws and other regulations is beneficial to the housing market.
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The broad vision laid out in this report is one primarily — although not completely — focused on government intervention and programs. It is one that has big promises but will never be able to deliver tangible results. The reason is that when the progressive imagination clashes with reality, reality wins every time. And, when the plan inevitably fails to deliver, it is those who are most vulnerable who will be hit the hardest.
Jack Elbaum is a summer 2023 Washington Examiner fellow.