Rent control seems like the kind of economic policy that makes life better for struggling renters. In crowded, expensive places like New York City, rent control has often been pitched as a necessity to safeguard affordable housing for those who need it. The new mayor of New York City, Zohran Mamdani, has made rent freezes an important part of his mandate. But economists have always countered this option and asserted that rent controls tend to hurt the very people they’re supposed to help.

The basics of rent control can be understood by simply looking at it as a cap on how much landlords can charge. The result should be that rents are kept affordable even with soaring costs of living. Seems like the noble thing to do. But is it?

Studies have shown that when rents are frozen below market rates, property values fall, making future investments in real estate less profitable. It shuts down cash flows for the landlords and drops the market value of their apartments. But should financial concerns of property owners outweigh the majority who are struggling to put a roof over their heads?

Economists say that the two are closely related. When rents are kept fixed but the costs of maintenance keep going up, landlords simply stop spending money on maintaining existing structures, since the math doesn’t work for them anymore. Then the real estate value of those buildings, and sometimes even the neighborhood, falls. This discourages the real estate developers from planning new construction projects in those areas and they start looking to other states where such policies don’t exist. This eventually results in two things. One, the supply of new housing shrinks, making the problem worse with an increasing population, and second, the units that do exist start falling apart.

And this is not the only way rent control hurts the very people it is supposed to protect, economists argue. Rent control shifts who gets access to housing in less than ideal ways. Higher-income tenants often win this lottery because of the resurrection of a black market. In cities like New York, under-the-table deposits or payments become the norm. So the well-off who are willing to pay these amounts can lock in apartments at half of what the market would normally charge.

Meanwhile, the lower income families, the ones who the policy was actually meant to protect, get priced out of the few affordable places left. This is because when rents can’t adjust, landlords start picking tenants based on credit scores, income history, and, sometimes, on much more discriminatory factors. Studies show that things that should never matter, like race, gender, family size, all start becoming the metrics by which landlords choose their tenants, and this happens in spite of the Fair Housing Act.

But the fallout doesn’t stop there with rent controls also impacting the city’s revenue. Property values drop because rent restrictions cause a drop in the expected earnings, and that means less property tax revenue. In the 1980s, economists estimated that New York City lost around $4 billion in taxable assessed value because of rent control. Berkeley, California, saw something similar.

Those crunching the numbers also point out that maintaining all this regulation isn’t cheap. A lot of bureaucracy is needed to keep the registration systems, hearings, complaints, appeals, and everything related, running smoothly. In Santa Monica, the Rent Control Board’s 1996 budget topped $4 million a year to manage just 28,000 apartments.

One of the serious issues affecting the biggest cities in the world is homelessness. One might think that rent control would help solve this. But economists argue that though rent control provides stability and assurance for a few tenants, it makes it harder for new renters to find a home at all. With fewer available units, more competition and longer waiting lists, the policy meant to reduce housing insecurity might actually deepen it, exacerbating the issue of homelessness.

The people who support rent control offer a different point of view. They say that rent control is the need of the hour to avoid pushing hardworking residents out of their neighborhoods, claiming it is one of the surest ways to counter gentrification. With relevant assistance in the form of tax breaks given to landlords to help them keep up with rising maintenance costs, rent controlled buildings can be maintained.

The proponents of rent control also counter that areas where there is rent control have a high degree of support from the local residents for changing zoning laws and building more affordable housing. In fact, residents who live in rent-controlled apartments were 37% more likely to support new local-housing construction in their neighborhoods than those living in non-controlled units.

Another factor stated is political will. Politicians are usually hesitant to bring around any kind of policies that are difficult to pass and give returns after a long couple of years. They like to show quick wins. Rent control laws bring quick wins for the politicians as they help them get electoral support, using which they can gather support for longer-term affordable housing legislation bills. This might be what Mamdani hopes to do. Many organizations which support YIMBY (Yes In My Backyard) have stated that states which have passed significant pro-housing legislation have introduced some form of rent control which has been crucial to getting those bills passed.

Economists assert that rent control alone doesn’t fix the real reasons housing is expensive. It doesn’t take care of restrictive zoning, the high property taxes, or the cumbersome building regulations that make construction painfully slow. So what then is the alternative? They recommend policy-makers to tear down the barriers that make construction difficult in the first place, to reform the restrictive zoning laws, and streamline the bureaucracy which poses a barrier to building more affordable housing.

Economists also suggest providing targeted subsidies to people who actually need them. One way could be to give renters direct financial assistance so they can afford better housing. This would help improve access without discouraging the supply of affordable, well-maintained residential units. Economists also recommend that rent-control policies be indexed to inflation, as seen in states like California, Oregon, and Washington. This allows landlords to raise rents in line with their own increasing costs, rather than just giving up on maintenance altogether.

The economic viewpoint is pretty clear on the fact that rent control might buy short-term political goodwill, but over the long-term it makes housing scarcer and more expensive. Milton Friedman explained this when he said that price controls are one of the fastest ways to create shortages. Mamdani may need to keep these economic challenges in mind as he tries to improve access to affordable housing in New York City. His rent-freeze policies will need to be supported with other measures to keep the landlords and developers from running to other states and prevent creating long-term shortages that economists are worried about.