As virtually every economist has told us for decades, “In many cases, rent control appears to be the most efficient technique presently known to destroy a city except for bombing.” Politicians keep promising the same thing not so they can actually fix the problem -- even the most inept political reptile is aware of this -- but to win votes from people who still think that emotions can trump the reality of a rent cap.
Rent Control Always Fails—Argentina Shows a Better Way
by Marcos Falcone
On Friday, March 20, in light of the Iran war, which has pushed up energy and other prices, Spanish Prime Minister Pedro Sánchez announced measures to lower the cost of living. Rent control was included among those measures, even though it is already failing in Spain.
Reportedly under pressure from one of its left-wing coalition partners, Sánchez decreed a nationwide contract extension at current prices for rentals about to expire, effectively amounting to a rent freeze. He has also instituted a 2 percent annual cap on rent increases through the end of 2027, which will apply to existing contracts currently indexed to inflation.
Ironically, a report published by the Instituto Juan de Mariana the same week as Sánchez’s announcement shows the extent of the harm that various forms of rent control are already causing in Spain. Following the introduction of rent caps in the region of Catalonia in 2024, the supply of rental housing has declined by 23 percent. Even more dramatically, the city of A Coruña and the region of Navarra saw rental supply fall by 44 percent and 51 percent, respectively, only six months after they designated certain areas as “stressed” housing markets and also imposed rent caps.
In a country with an estimated deficit of 700,000 housing units, rent control is making things even worse.
Rent control in Spain not only cuts supply but also fails to improve conditions for renters. As the Instituto Juan de Mariana shows, wherever rent control has recently been introduced, average rental unit space has decreased, and prices per square meter have either stayed the same or increased—in Barcelona, for example, prices reached a record high in the third quarter of 2025.
The Spanish experience contrasts sharply with Argentina’s, which has adopted the exact opposite approach since Javier Milei became president in December 2023.
Before then, listings had plunged by a massive 53 percent following the passage of a rent control law in 2020. But after Milei repealed it ten days after taking office, supplies rose by a staggering 180 percent less than a year and a half later. (My colleague Ryan Bourne and I documented that extensively here).
As of December 2025, rental prices in the city of Buenos Aires were still almost 30 percent down in real terms from two years before, and supply has not declined.
Rent control does more harm than good, as Ryan Bourne explains in The War on Prices. Hopefully, Spain will correct course as Argentina did before things get much worse.
Marcos Falcone is a policy analyst focusing on Latin America at the Cato Institute’s Center for Global Liberty and Prosperity. His research interests range from contemporary public policy in his home country of Argentina to the history, theory, and language of classical liberalism. His essays have received awards by the Mont Pelerin Society, Caminos de la Libertad, and the European Center for Austrian Economics, among others. His columns appear frequently in Argentine and US media.His post first appeared at the Cato at Liberty blog.
1 comment:
As an example of "can't get it, won't get it", I present you with the Denizens of The Standard when confronted by the facts of the Argentina rental test, where supply increased dramatically by August 2024.
I won't force you to click on their post that I so rudely interrupted but the title was awesome, Is a Transformational Left-Wing Leadership of the NZ Labour Party Possible?
Instead you can just read the two key responses to me at my own post on the subject, A 195.23% Rise in Socialist Refusal to Understand Marketplaces, that being a reference to the increase in the supply of rental housing following Melei's reforms:
Difficult economic times lead to fundraising – such as the pawning of goods, renting out of rooms/taking in boarders as well. – SPC
…
Where did these newly available rental units come from? Were they vacant because the rent control discouraged rentals? Did landlords evict a shed load of long term tenants? – Joe90
I suppose I could return now with updated data from a time period that exceeds the days of "difficult economic times", but "Joe90"'s argument will still stand in his mind. Nothing short of the Big Rat would change it.
Post a Comment