Last week, our constantly distracted legislature finally managed to pass a piece of legislation – one that is extremely unhealthy for the economy and ultimately unwholesome for the poor who desperately need affordable housing. The rent control law was extended to 2008.
There is a reason why politicians do this. That is the same reason why the term "politician" is generally considered a pejorative.
For myopic reasons, current beneficiaries of rent control want that law to be applied for eternity. For them, it means that they will continue paying the same low rent for the same decaying housing facilities.
These beneficiaries do not see the long-term consequences of rent control. They do not care – even if that law produces the phenomenon of inner city blight and chronic shortages of cheap housing for rent.
These beneficiaries constitute a real constituency. It is tempting for politicians to pander to them even of they ultimately prejudice the homeless.
Let me take this case by using an analogy.
Jeepney drivers represent the most inefficient method of public transportation. Jeepneys have the lowest passenger-per-engine ratio of all possible means of public conveyance. The sheer number of jeepneys in the metropolitan area clog up the streets. By the nature of this mode of transport, they drop passengers wherever and overtake recklessly to beat other drivers in a race for passengers. By design, this mode of transport is uncomfortable and unsafe: passengers swing side to side as the thing moves, they could not be air-conditioned and no seatbelts could be provided given the provisions for seating.
Yet nothing could be done to drive the jeepneys away. Buses, with higher passengers-per-engine ratio, could not be introduced into routes traditionally plied by the jeepneys.
The reason for this is that the jeepney drivers constitute a powerful constituency. Any move to render them obsolete will be met with threats of a strike.
They are an insistent constituency. Lately, they joined protests against the ticketing policies of the MMDA.
Because of their political power, the jeepney drivers federations have effectively stymied any effort to modernize our mass transport system. They rule the road even as the city descends into chaos. They dirty the air, intimidate other motorists and make our roads a battleground.
Now back to rent control.
The long-term implication of rent control is that it discourages investments in cheap housing for rent. It discourages improvement of existing housing facilities under rent control. The "beneficiaries" of rent control might enjoy what momentarily appears to be its benefits; but over time, if they have not noticed, their neighborhood deteriorates into utter squalor.
With investments into cheaper housing-for-rent discouraged, a shortage of affordable housing facilities develops. The homeless could not find homes.
In all places where rent-control was imposed, we see inner-city rot. The housing facilities put under rent-control deteriorate. Neighborhoods become urban blights. Rent-controlled housing become only a notch better than slums; and the slum areas grow because no one invests in proper low-cost housing for rent.
We see that now in many of the older neighborhood in the metropolis.
Drive through Sampaloc. Once upon a time, this was a gracious middle class district. Today, it is drab and miserable.
By driving away investments from cheap housing for rent, this policy penalizes a growing urban population in dire need of affordable housing. Young Filipinos in the city stay with their parents until late in life simply because there is no affordable housing available for them.
Under rent control, only the slums grow. And that leads to a second generation of social problems: the encroachment on public land (as in the Northrail project), the inhibition of investments into land occupied by squatters (as in the Pinahan area in Quezon City) and the prevention of urban renewal (as in the case of hundreds of privately owned land that could not be developed because the squatters suddenly enjoy protection under the law).
Rent control is one of a cluster of populist policies that prevents our city from regenerating, from optimizing the use of land made accessible by heavy public investments in infrastructure as is the case along the light rail lines.
It is an open secret that legitimate landowners often need to resort to arson in order to regain control of the land they already own. Squatting ties up valuable urban real estate in endless litigation, creating yet another layer of hindrances to our economic progress.
The rent control law is symbolic of the deleterious effects of populist policies that get in the way of market forces in order to pander to short-term interest of well-formed constituencies.
The extension of rent control , done by every Congress since we care to remember, might please those who reap the illusory short-term benefits of such a policy that distorts optimal use of our resources. Such populist policies are necessarily short-sighted.
These policies hamper the progress that would have, like the rising tide, raised all ships.