If you want to lower rents in the next five weeks, rent control may be appealing. If you want to lower rents in the next five years, it shouldn’t be.
Rents in Las Vegas are dropping. Apartments.com found that Las Vegas rents declined by 0.2 percent in April. Nationally, rents increased by 0.2 percent. Las Vegas was one of just five major markets in the country to post declines. The other four were San Antonio, Houston, Fort Lauderdale and Tampa.
If you listen to advocates of rent control, this result might surprise you. They claim that government intervention is needed to lower housing prices. For several sessions, legislative Democrats have proposed various rent control measures. Gov. Joe Lombardo, a Republican, opposed these efforts. Attorney General Aaron Ford, the presumptive Democratic gubernatorial nominee, has attacked him for his stance.
“Lombardo has consistently protected corporate interests while leaving Nevada families with fewer protections and higher housing costs,” Mr. Ford’s cliché-filled housing plan states.
Mr. Ford must hope his would-be supporters aren’t renters or don’t read the news. In September, the Review-Journal’s Patrick Blennerhassett reported, “Las Vegas rents are dropping faster than anywhere else in the country, report says.” A November article noted, “Rents continue to decline in Las Vegas Valley, report says.”
These reductions reflect the power of Economics 101. They’re the result of companies building more apartments.
“The largest driver of rent growth trends in April is still the supply wave of the early 2020s,” said Danny Khalil, the director of market analytics for Apartments.com in Las Vegas.
Consider why companies would invest millions of dollars to build new apartments. They aren’t charities. They are doing it to make a profit — and that includes anticipated future rent increases. The more money that can be made, the more likely companies are to build.
But what has happened in Las Vegas shows the story doesn’t end there. The promise of profits leads to more supply — which drives down prices. This is the paradox of profit in a free market. Profit is the signal and incentive that ends up reducing prices.
Rent control short-circuits this process and discourages renovation and investment. The promised short-term fix undercuts the mechanism that drives down future prices. Ironically, this loss of supply often drives market prices even higher.
Gov. Lombardo endured political heat to oppose rent control measures. Las Vegas’ falling rents show he was right to do so.
