Image credit: Bahay na Bato in San Nicolas from Tom Cockrem's Travel Image Library.
"In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing."Assar Lindbeck
If there is a third rail in Philippine politics, it is rent control. The law has been extended countless times (the latest incarnation is RA 9341 which extends RA 9161) and though each time the law is passed or extended and sunset date is set, it is nevertheless predictable that it will be extended or renewed next time the law is set to lapse.
Arroyo, who has a Ph.D. in economics, must KNOW about the damaging effects of rent control and so I DO NOT UNDERSTAND why she approved the current extension. Or why anyone who took some basic economics in college (i.e. -our lawmakers and policy wonks) would approve of it. -Apart from it being POLITICALLY UNTOUCHABLE.
I am by no means neo-liberal in my economics but the left and right sides of the spectrum of economic thinking (from the chicago school/washington consensus to socialists and the welfare state architects of northern europe) agree on the destructive effects of rent control. It distorts not only the market but damages the built environment itself:
"...rent control diverts new investment, which would otherwise have gone to rental housing, toward other, greener pastures—greener in terms of consumer need. They have demonstrated that it leads to housing deterioration, to fewer repairs and less maintenance. For example, Paul Niebanck reports that 29 percent of rent-controlled housing in the United States is deteriorated, but only 8 percent of the uncontrolled units are in such a state of disrepair. Joel Brenner and Herbert Franklin cite similar statistics for England and France." (Walter Block, 1990)Assar Lindbeck, whom I quote above, is a socialist. Paul Krugman has this to say:
"The analysis of rent control is among the best-understood issues in all of economics, and -- among economists, anyway -- one of the least controversial. In 1992 a poll of the American Economic Association found 93 percent of its members agreeing that "a ceiling on rents reduces the quality and quantity of housing." Almost every freshman-level textbook contains a case study on rent control, using its known adverse side effects to illustrate the principles of supply and demand."And yet it continues to be untouchable -even by our columnists and pundits. (It could be that my google-foo is weak, but I can't find a single comment by Winnie Monsod on the matter, Raul Pangalangan condemns it but only in passing while criticizing tuition controls. Not even the ultra-conservative Bernie Villegas has critiqued it.)
It's not for a lack of local studies, either. A 2002 study by Marife Ballesteros for the Philippine Institute for Developmental Studies showed that:
"net benefits from rent control are positive and targets mainly the poor families. However, benefits have negligible effects on income. They also tend to be eroded by the regressive effects of rent control on supply of rental housing, in particular, the strict eviction provisions of the law. Stiff competition for low-priced rental housing, low quality of housing for the poor, higher rents for the uncontrolled sector, and misallocation of resources are the possible effects of rent control on housing."Now why should this be important to the Heritage Conservation Society? Because the only real way to preserve our built environment is to make sure it is in the economic interest of the owners to invest in their properties. The Society may save a building or two by their current media strategy but they will do an even greater service to Metro Manila's heritage by making sure it is financially rewarding for landowners to reinvest in old buildings. Otherwise, the lack of actual income from rent causes disinvestment and decay. Landowners who can source new capital will more likely tear down their old buildings, while those who do not have the resources will not even be able to re-finance enough so that they can invest in the upkeep of their old buildings.
Want to know why Metro Manila is in a state of disrepair? Five decades of rent control. Want to know why we have squatter colonies? Rent control. Want to know why we're losing beautiful old homes? Rent control. Want to know why we have a small middle class? Rent control.
Now what about the poor? Won't lifting rent control make it more difficult for the majority of our population to find housing? We've had rent control for over 5 decades. As Dr. Phil likes to ask, "How's that working for you?"
Multiple Choice Quiz: We add over 100,000 people to the population of Metro Manila each year. And because we build so few new apartments, where do you think most of our new internal migrants wind up living?
- a) In dilapidated housing
- b) In crumbling apartment blocks
- c) In old, over crowded boarding rooms
- d) In squatter colonies
- e) All of the above