Suppose you have a terrible toothache. An over the counter painkiller can reduce the pain for a while. But it will not fix whatever is actually wrong with your tooth.
For that, you need a dentist.
Painkillers may relieve the symptoms, but they do not cure the underlying problem.
Freezing your rent is the toothache.
(It also indicates just how ‘dumb’ the public really is when it comes to economics. Do not ever aspire to be in this ‘public’ group.)
New York City Mayor Zohran Mamdani is pursuing a rent freeze as part of his effort to make life more ‘affordable’ for New Yorkers.
There’s that word again. ‘Affordable’.
We’ve been hearing it a lot. And for good reason; it’s a Winner’s Curse phenomenon but we’ll progress that idea another day.
Source: The Wall Street Journal
Anyway…
His policy would freeze rents on renewal leases for around one million apartments across the city, with the freeze set to take effect on October 1. For tenants struggling with the rising cost of living, the appeal is obvious. When they renew their leases, they would not have to worry about another rent increase.
Hallelujah.
Sounds good, right?
Here’s the key to your salvation. To your freedom. To your very deep understanding of how economics ‘really’ works.
‘Rents’ are supposed to go up.
Eh? Say what?
Yep, you read that right. Rents are supposed to go up.
This is the absolute key to understanding how economics works AND your ability to make accurate economic forecasts. That you can profit from.
You see, much of a location’s value comes from nature, public investment, infrastructure, businesses, workers, neighbours, and society as a whole.
When we all come together in a city and interact with each other, the rent of the best locations is going to rise. Naturally, and of itself.
And it’s the natural value with which to fund the government.
So where should that value go?
Back to the public.
It could be used to abolish taxes on absolutely everything else and I mean everything for starters. Which would dramatically lift the amount of your wage you actually get to keep.
Or it could be returned directly to citizens as a regular payment.
We call this idea a Citizen’s Dividend, based on the principle that value created in land and society should benefit everyone. Not just those who were fortunate enough to tie up the very best locations years ago.
And this would also mean we could abolish instantly at least half of government. Like immediately. The tax department for starters.
Rent freezes may ease the pain. But if we want to cure the housing crisis rather than simply manage its symptoms, we have to treat the problem at its source.
This means collecting the Rent for the public. Our Citizen’s Dividend e-book has more on this for you.
A rent freeze only treats the economic symptoms.
You cannot permanently solve rising housing costs simply by limiting how much landlords can charge. Prices may continue rising in parts of the housing market not covered by the policy.
Landlords under fixed rents may also have less financial room to maintain and repair their buildings.
If we want housing to remain affordable in the long run, we need to address the root cause. And that means understanding how the rent really works.
Happy reading,
The Citizen’s Dividend Team
