GEORDIN HILL-LEWIS | Housing market manipulation deepens inequality

I heard Rebecca Davis on the radio the other day responding to my firm opposition to policies which seek to manipulate the rental market. I oppose them because they don’t work, and are actually even more unfair to those seeking accommodation, because they entrench inequality. In the interview, Ms Davis was proposing some alternatives to full-on rent control, like caps on annual increases.

It is a mark of progress in the debate that she accepts, perhaps grudgingly, that rent control is a bad idea that has not worked anywhere it’s been tried. But even the watered-down alternatives she proposes amount to the same thing – market manipulation, and have the same effect, which is to deepen inequality.

Both Ms Davis and I want the same thing – we want more affordable housing prices, especially in the inner city.

But there is simply no shortcut to achieving that. It’s a red flag whenever a policy proposal promises shortcuts and immediate solutions. That’s usually a sign of economic populism, as it is in this case.

The only sustainable way to lower accommodation prices is to increase supply until it meets demand. You can’t price control your way out of it, you can only build your way out of it. And that’s the approach we are taking, by easing planning rules, making it simpler to get approvals, helping emerging developers by cutting fees, enabling micro-developers in townships, releasing discounted municipal land for affordable housing, and much more.

ALSO READ: Airbnb releases report on Cape Town to 'set record straight' amid concerns about its impact on housing market

We’re also working to ensure that all short-term rentals are subject to commercial rates and tariffs, not residential tariffs. A forthcoming by-law aims to fast-track this changeover.

This will ensure that no one is able to game the system, and that short-term rentals compete on an even playing field with hotels.

Aside from all this, it is quite something that many who describe themselves as being on the ‘left’, or as democratic socialists, openly advocate for policies that in effect would deepen inequality. I don’t think they do so knowingly, of course - I’m sure most of them are well-meaning. I know Ms Davis is.

It is important not to neglect the inevitable second order effects of market manipulation policies. Their impact is malign, however good the intentions are.

There’s no getting away from the facts. Artificial manipulation of the rental market leads to only one outcome: less available accommodation. This is not a controversial statement. It is incontrovertible, inevitable and widely documented.

The builders of new accommodation flee the market, and so the existing stock of available accommodation is stuck at its existing level. Those who are lucky enough to be in an apartment already are truly the lucky few, winning the rental cap lotto. While those seeking accommodation are locked out forever.

And when supply is stuck, and demand is growing, prices go up. So any apartments not subject to rent control will become even more expensive than before.

Less accommodation. More expensive accommodation. Locking out the many to protect the few. Less building. Less jobs. These are the things that rent control advocates are in effect really arguing for.

Let’s rather commit to making a positive difference by supporting meaningful solutions, not the populist chant of the day.

In this way we can truly speed up supply of new housing in Cape Town.

Geordin Hill-Lewis is the Mayor of Cape Town.