States need to be cautious when implementing universal rent control. It’s possible for governments to set unrealistic price levels that backfire and hurt economic activity. States should make sure to use zoning deregulation and land taxes as much as possible, reducing the need for rent-control laws. And they should monitor rent caps carefully for signs that construction or renovation is being discouraged. A little rent control is probably fine, but too much is too much.
Noah Smith is a Bloomberg Opinion columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.