Since the laws governing rent stabilization decontrol at a particular price point, renters of long tenure tend not to give up larger apartments with higher rents, though, which displaces growing families into the non-regulated rental market at higher prices. This is non-optimal for welfare outcomes.

But, you know? The New York City Housing Authority has a fantastically successful rent stabilization program (in terms of improving the welfare of the poorest). It just hasn’t been expanded in the last fifty years because of the objections of landlords.

Rent controls are a fairly drastic interference with market mechanisms. I claim no expertise but I believe there are all sorts of ways that they get subverted. For example, landlords will allow buildings to fall into disrepair while still charging maximum allowed rental. In the US, you often find that tenants lucky enough to get rent-controlled apartments then illegally sub-let them, creaming off a profit – thus real rental prices are on a black market. (Those controlling the apartments are then, economically speaking, land-owners.)

If you really do succeed in reducing rents you may drive a shift from renting to ownership – then the true rent is the “imputed rent” reflected in the property price. (This is more relevant in a society with a level of home-ownership which is already fairly high, unlike many third-world situations.)

To various commenters above; it isn’t necessary to have a land-owner cartel. The efficient operation of the land market is sufficient to drive prices up to absorb much of extra per capita income of the poor. (It is true that cartels can make things even worse; my understanding is that in Ireland around the time of the potato famine, English landowners kept large areas of productive land completely out of use, because artificial shortages of land dramatically increased rents, and a cartel can sustain this.)

Paul J. Reber: demand is not just the amount of land people would like to have. It also measures what they are willing to pay for it. The more income people get (or COULD get if they could secure the required accommodations) , the more they will bid up the price of desirable locations. Also, land is not just required for dwellings but for shops, offices, factories etc; to take advantage of the opportunities available in the economy you need a space within the appropriate geographic region to operate in. More economic activity = more demand, but no more supply.

Paul Nollen: Thanks for the interesting link. I have read through “The Alaska Permanent Fund Dividend: An Experiment in Wealth Distribution” which poses some interesting questions, but it doesn’t mention rents or real-estate prices. It *does* mention that real wages fell in the decade to 2002, offsetting gains in per capita income from the dividend. Another interesting aspect is that the dividend is paid annually, which means that for those living paycheck-to-paycheck, it has a smaller effect on their ability to pay rent than a monthly dividend would. (The BIG experiment in Namibia is paying out monthly.)

And Virgil: the story of the FAP is very complicated; Nixon’s FAP was killed both by your standard conservative interests, but also by liberals and the National Welfare Rights Organizations – because they thought it didn’t go far enough, and they thought that they could get a better bill through when the Democrats won the presidency in 1972. It’s a strange characteristic of late 60s and 70s American politics – you had very liberal Congresses by today’s standards, but the big ticket legislation kept getting sidetracked by people’s mistaken assumptions about what would happen in national elections.

It seems that the cartel ascribed to landowners in some of the previous comments would be sufficient to extract any excess value whatsoever from the peasantry — and so they would have no way out of their poverty other than, perhaps, land reform, or breaking the cartel. But while this situation has obtained at various times and places, it does not obtain always and everywhere. Do the commenters have some specific knowledge that it currently obtains in Namibia?

If such a powerful cartel does not, in fact, exist, then presumably rents would go up, just as they do in cities in the United States that have better-paying work available, but not enough to extract the entire BIG. Even a modicum of competition in the housing-rental market would suffice to permit the tenants to retain a substantial fraction of the BIG.

Paul, your points about Africa as a whole are certainly worth debating. They are not particularly relevant to Namibia, however, which like South Africa has a relatively well-functioning state bureaucracy and which, again like South Africa, suffers more from extraordinary national inequality than from extraordinary national poverty.

Practically, of course, landowners would collude to raise rents together and essentially extract the BIG from the poor. Unless some other form of corruption got to the money first. One of the problems of scaling a program like this is that the more people you are planning to support, the more money is involved and the greater temptation for the corrupt fixers and thieves to come after it.

The great frustration of Africa is the difficulty of administering helpful programs like this. Without institutions and social structures to effectively distribute help, a lot of the financial aid to Africa gets stolen. And yet, how do you improve the institutions in an impoverished country in Africa without financial aid?

Quote:
“The purpose of this paper is to provide a short introduction to the Alaska Permanent Fund Dividend Program—a method for returning a portion of the revenues from petroleum development to the citizens of Alaska as a direct cash payment. I will briefly touch on 5 topics— the mechanics of the Dividend, why it was established, its history, its economic, political, and social effects, and the future of the Dividend.”
http://www.iser.uaa.alaska.edu/iser/people/Scott/Goldsmith_Web_Page_Body_2.htm

Kind Regards

Paul

There may be nothing at all empirically wrong with this scheme, though only time will tell for sure, by removing the possibility that other incidentally contemporaneous factors were responsible for the observed beneficial effects.

But empirical results aren’t the problem that the positive results of such a program would face getting itself believed in our society. Just conducting the experiment goes against axioms and postulates of the current state religion, and so the results cannot be taken seriously until and unless that religion is overthrown. It’s the same situation as that cardinal of the Church who refused to look through Galileo’s telescope for fear that he might see empirical evidence questioning the reigning theology of the day. “Everyone” knows that you create jobs and wealth in a society by getting more money to the rich, because they’re the “job creators”. Look, if this myth can survive the plain, palpable evidence provided by the current financial crisis in our own society that the rich use their excess money seeking rent rather than creating jobs, there is approximately zero probability that devotees of our state religion will be convinced to the contrary by this experiment in some far-off society that they don’t understand nearly as well as our own. The non-religious already know that you improve an economy’s ability to deliver what everybody really needs by directing money at what everybody really needs, and away from the rent-seekers.

The religious simply won’t look through your telescope. “Serious” people will be sure that the beneficial effects were caused by incidental contemporaneous factors, like, say, that the govt of Namibia had the great good sense to sign away oil rights to some international conglomerate at about the same time. That sort of thing is much more likely, theologically speaking, to lift all boats, even if the mechanism is a bit hard to trace here on earth.