To most voters, freezing rents looks like common sense: If prices are out of reach, stop them from rising. But to economists, that’s like treating a fever by breaking the thermometer: It suppresses the symptom without curing the disease, the persistent shortage of housing.
Sims’ work examined the rent-control regime that once governed Cambridge, Mass., where tenants could stay indefinitely at below-market rents. The policy was meant to keep housing affordable, but it led to what he calls misallocation.
“People who could do better by moving tend to stay,” he told Fortune. “Older households hang onto large units they no longer need, while young families can’t find space. Over time, you end up with the wrong people in the wrong apartments.”
“It’s not about pitying landlords,” Sims said. “It’s about understanding incentives. You can’t expect people to invest in something if they’ll never break even—just like you can’t expect tenants to volunteer to pay more rent.”
For economists, the deeper problem with rent freezes is conceptual: They imply that affordability can simply be decreed against the logic of supply and demand.
“It creates this belief that the problem can be solved by fiat,” Sims said. “But rents are high because people want to live in New York. The only lasting fix is to make it easier to build more housing that people actually want.”
He offers a visceral analogy of market pressures: Black Friday. People don’t wait in line for stores anymore on Black Friday, Sims said, but there was a time when, for a $1,000 TV at $200, there’d be a line around the block at 4:00AM, and only a few lucky people would get the T.V.
“But housing isn’t like a $200 TV,” Sims observed. “Everyone kind of needs a place to live, but if housing is priced like the $200 TV, then there’s a bunch of people in that line who don’t get it.”
That’s the thing about rent control, economists say: They benefit insiders at the expense of outsiders. Over time, it can deepen inequality by keeping younger, lower-income, or newly arrived residents locked out of regulated neighborhoods that become effectively closed clubs.
“If you don’t pair a rent freeze with a credible plan to add housing,” Sims said, “you’re not solving the problem. You’re just pushing off accountability without really solving the underlying problem.”
