Why We’re Getting Poorer: A Realist’s Guide to the Economy and How We Can Fix It by Cahal Moran

Author:Cahal Moran [Moran, Cahal]
Language: eng
Format: epub
Publisher: HarperCollinsPublishers
Published: 2025-03-13T00:00:00+00:00

TO CONTROL OR NOT TO CONTROL?

In many cases rent control appears to be the most efficient technique presently known to destroy a city – except for bombing.

Assar Lindbeck, Professor of Economics, Stockholm University

Navigating smarmy estate agents, negligent landlords and rip-off mortgages are all parts of the type of housing market we have chosen to create in the Anglo-American world. Elsewhere, things are somewhat better thanks to a few smart policy choices. Countries like Germany and the Netherlands, for instance, see most of their population renting from private landlords. Looking at Anglo markets, you might expect this to be associated with more expensive housing, but the opposite is true. These countries may have problems, but many residents seem to enjoy stable access to housing despite less political focus on home ownership.

The truth is that access to housing does not depend on having ownership of it, and these countries take that reality seriously. Germany has the lowest home ownership proportion in the OECD (a group of rich countries) at around 50 per cent and in Berlin it is a mere 15 per cent. This compares to about two-thirds in the USA, UK and France. While private renting is more common in Germany, even among richer individuals, renters enjoy a wide range of guarantees including controls on rent and security from eviction. In Berlin, landlords can rarely increase rents above the level paid by the previous tenant. Canada, Spain, the Netherlands and several US states have followed similar policies.[39] Although rent control is a controversial policy among economists, it is interesting how it challenges our perceptions of ownership.

Fetishising home ownership in and of itself can end up mistaking financial wealth – the value of the home – for actual access to housing. Economist Josh Mason notes that because Anglo-American populations have much of their wealth tied up in housing, the statistics could lead one to conclude that the people of Germany or the Netherlands are less wealthy than those in the UK and the USA just because their homes are worth less in financial terms. But this would be a case of just looking at the balance sheet and ignoring the concrete reality of access to housing (pun intended). Germans who rent are about as secure in their dwellings as the average UK homeowner and many have no intention of buying for this reason.[40]

These countries would seem to prove that a well-regulated rental market is one workable way to approach the housing problem. But one of the issues many economists have with these strict protections is that they can put landlords in a straitjacket. The more difficult and expensive you make renting out a home, the argument goes, the less likely landlords are to invest in homes or even bother renting them out in the first place. Owing to ballooning rents, Berlin itself introduced quite a strict rent-control policy in 2020 – so strict, in fact, that it was ruled unconstitutional around a year later. While active, the policy reduced rents in the

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