"Government control of rentals, or anything for that matter, ignores the importance of allowing the market to dictate prices."
Alexandria Ocasio-Cortez made history, becoming the youngest woman to be elected to the US Congress. But the 29-year-old former bartender told reporters that, currently, she’s unable to afford an apartment in Washington, DC, as her congressional salary only kicks in in January.
I haven’t heard of any Filipino congressman or woman complain of anything similar to that yet.
This story generated a great deal of worldwide buzz, and both in the left- and right-leaning media. But, all sides are missing the whole point, as neither her supporters nor her critics have looked into why DC housing is so inaccessible—even to a newly-elected congresswoman.
Speaking to The New York Times, Ocasio-Cortez explained she has three months without any income before she’s a congresswoman. “So, how do I get an apartment?” she asked.
But before earning $174,000 (or approximately P9.3 million) per year, which would make it relatively easy for the lawmaker to get a comfortable rental, she claims she’s having a hard time finding a place to live.
On Twitter, Ocasio-Cortez blamed the US electoral system for failing to take into account people like her, implying that the structure is stacked up against “working-class people.”
However, she missed a great opportunity to discuss what really ails residents of global cities like DC, perpetuating the idea that government isn’t doing enough to help the poor and ignoring that it’s precisely because government does too much that the rent is so high.
According to the 2010 DC Asian Census Report, 12.8 percent of Asian Americans in Washington, DC are Filipinos. Our kababayans report that the average monthly rent for a two-bedroom apartment is $2,500 (or approximately P133,000). To afford it on one’s salary, the resident must make $108,300 (or approximately P5.8 million) per year, a SmartAsset study claims. What led to these high rental rates, however, has nothing to do with greedy landlords trying to keep our kababayans, the poor, or immigrants at bay. Instead, government regulations that go back decades have only helped to artificially restrict the supply of housing despite the high demand, making it unaffordable as a result.
Land-use regulations designed to set urban-growth boundaries and “control” side effects of the urban sprawl, for instance, has severely limited the amount of land that can be used for new housing. There are also rent control rules that, particularly in global cities like DC, have made housing less affordable to anyone but those who already live in rent-controlled apartment buildings.
As I continually explain in this column, government control of rentals, or anything for that matter, ignores the importance of allowing the market to dictate prices. After all, prices are nothing but signals, and having these signals distorted will also make it difficult for the market to adjust and figure out whether apartments that fall under rental control rules could be better used for other ends.
Allowing this top-down approach to housing is also an attack against property rights, as it removes building owners from the equation, ignoring their rights over their own properties and keeping them from accepting new offers by potential renters. It’s very similar to theft, as rent control rules basically take half or more of each apartment’s value from the landlord.
Rent controls also scare potential developers, as they know that while many of these cities exempt new properties from these rules, the exemptions may be eliminated at any given time by lawmakers.
The bottom line is that many rules imposed by governments worldwide and their consequences are often ignored by politicians, even young and energized newcomers such as Ocasio-Cortez herself, who could have used her story to advocate for the end of government intervention in any economy. Instead, she chose to use this anecdote to claim people were “mocking lower incomes,” adding that her plight was an example of “the rich are getting richer and the poor, poorer.”