Historically, rent control — in all its forms — has proven counterproductive.
Historically, rent control — in all its forms — has proven counterproductive.
T here is no campaign exception to the Constitution. The pledges made by candidates receive no special deference from the Supreme Court.
Congress needs to keep this reality in mind when it comes time to weigh moving forward on Vice President Kamala Harris’s rent-control plan.
Over the last several weeks, she has repeatedly promised to institute a federal rent cap — a policy that may sound good to some thanks to the inflation that has run rampant over the last four years.
Some apologists for Harris’s policy argue that it should not be called rent control, which economists on both sides of the aisle have resoundingly rejected, because the cap is not mandatory — landlords can choose to not adhere to her rent cap if they are willing to lose tax benefits. This argument is disingenuous. The depreciation write-off landlords would lose, along with a host other tax benefits, would be significant — so much so that many of them would have no choice but to comply.
As a secondary means of controlling rent prices, Harris also pledged to ban the algorithms property managers use to help determine their prices, a move that three attorneys general from my home state of Virginia argued would have no legal or political justification whatsoever. As the Wall Street Journal editorial board put it, “what’s really going on here” with respect to all this criticism of pricing algorithms “is an attempt to distract voters from frustration over the Biden Administration’s inflationary policies.” Yet, in late August, the Biden-Harris Department of Justice proceeded with a suit against them anyway.
Historically, rent control — in all its forms — has proven counterproductive.
The St. Louis Federal Reserve once noted that “economists generally have found that, while rent-control policies do restrict rents at more affordable rates, they can also lead to a reduction of rental stock and maintenance, thereby exacerbating affordable housing shortages.”
Beyond the controversies over its policy impacts, rent control has also been scrutinized over constitutional concerns, especially in light of the increasing willingness of Supreme Court justices to rightfully prioritize the original understanding of the Constitution over flawed interpretations.
Earlier this year, Justice Clarence Thomas opened the door for the Supreme Court to reexamine its interpretation of how the commerce clause affects rent control. In 74 Pinehurst v. New York, Justice Thomas pointed out that New York’s rent-control scheme turned private property into a public good, raising critical Fifth Amendment “takings” questions and other constitutional concerns. When the right case comes along, the odds are good that the high court will remove any questions as to whether Congress has the authority to enforce rent controls across the country.
The commerce clause allows Congress to “regulate commerce . . . among the several states.” Since the Founding, both the meaning of “commerce” as well as “among the several states” has generated substantial debate. The winner has tended to be whichever party was arguing for an expansion of Congress’s authority to regulate even the most local of economic activities.
The classic instance of federal overreach being excused by a faulty interpretation of the commerce clause came in Wickard v. Filburn. The 1942 decision involved a farmer, Roscoe Filburn, who opted to grow more grain than was authorized by federal law. He argued that because the excess wheat was not to sell to out-of-state buyers or even to sell to his in-state neighbors, the commerce clause could not be used to limit the amount of wheat grown to feed his family and his animals. This humble farmer drew the attention of federal regulators who sought to fine him for violating federal law. Sadly, the government won. “Wheat grown for home consumption,” according to the Supreme Court, “would have a substantial influence on price conditions on the wheat market.” They reasoned that his personal decision to grow excess wheat, if repeated by others, would indirectly and in the aggregate affect interstate commerce.
Wickard, like a cat with nine lives, remains good law despite growing doubts as to its constitutionality. Its days, however, are numbered. As pointed out by Professor Randy Barnett, the proper interpretation of the commerce clause — one grounded in the letter and spirit of the Constitution — provides Congress with substantial, but limited, authority. Professor Barnett reads the clause to afford the following: “Congress has power to specify rules to govern the manner by which people may exchange or trade goods from one state to another, to remove obstructions to domestic trade erected by states; and to both regulate and restrict the flow of goods to and from other nations (and the Indian tribes) for the purpose of promoting the domestic economy and foreign trade.”
Essential to that straightforward interpretation is the actual exchange or trade of goods across state lines. That necessary condition was written out of the clause by the Wickard Court. Fortunately, the current Court seems unlikely to make the same mistake.
Applying the proper reading of the commerce clause erodes the supposed authority of Congress to regulate any commercial activity that, if aggregated, has a substantial effect on interstate commerce. Congress’s nearly limitless power under the flawed reading of the clause since Wickard has permitted government intervention into even the most private and local decisions — an outcome that directly contradicts with the intention of the Founders.
Our Constitution is not one that allows the ends to justify the means. While many may welcome lower rent, that does not justify the perpetuation of a flawed reading of Congress’s constitutional authority, which does not extend into every real-estate market in the country (each one different from the next) and attempting to set prices for every rental property.
Policy promises that stand on shaky constitutional foundations carry significant risk. Voters lured to the ballot box in hopes of lower rents may come to distrust government officials and institutions when that policy runs aground upon confronting the Constitution. This is not a healthy dynamic.
Vice President Harris’s rent-control proposal seeks to bypass these constitutional issues similarly to how Obamacare bypassed constitutional concerns about a federal health-care mandate. Her plan is attempting to use the tax code to achieve a goal that the courts would not permit otherwise.
Whoever wins the presidency has an obligation to “preserve, protect and defend the Constitution of the United States” to the best of their ability. Preservation of the Constitution imposes a proactive responsibility on the president. They ought not undermine its resilience and legitimacy by promising what is clearly an end around the Constitution.