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“In a Good Economy Homelessness Goes Up”: Inflation and the Housing Question


David Stein (@DavidpStein) is Assistant Professor of History at the University of California, Santa Barbara, and author of Fearing Inflation, Inflating Fears: The Civil Rights Struggle for Full Employment and the Rise of the Carceral State, 1929-1986 (forthcoming).

This post is part of a symposium on inflationRead the rest of the symposium here.


For renters in many cities, the first year of the COVID-19 crisis possessed one significant silver lining: a moderate slowdown in the price of rent. But as labor markets rebounded, rental inflation has soared. According to one analysis focused on new leases, it increased 14% nationally in 2021, with much larger hikes in certain metro areas—such as Austin, TX (40%), New York City (35%), and Miami (34%). This turbulence has produced a crisis for renters. According to the National Equity Atlas, almost six million households are behind on rent—65% of whom are people of color, and 54% of whom have experienced recent unemployment. When it comes to housing, work, and pricing power, race—as Stuart Hall emphasized—remains the modality in which class is lived.

Inflationary dynamics in housing are important for several reasons. First, as other pieces in this symposium have emphasized, they demonstrate the inadequacies of general price indices to apprehend the social and economic impacts of inflation. And second, shelter is one of the largest items in a person’s budget, and among the most rigid—it’s not easy to move apartments, let alone move cities in search of lower-cost housing. In addition, housing prices are pro-cyclical—meaning they will generally increase alongside a business cycle. This is partly why 2021 was such a bad year for renters. Los Angeles Mayor Eric Garcetti explained candidly what this meant to everyday people. In a September 2020 video circulated widely by local activists, Garcetti explained the results of rental increases during an economic expansion. “In a good economy, homelessness goes up,” he said. 

What Garcetti’s comment omitted—and what activists decried—was the Mayor’s ability to shape these relationships. How can the state act as a countervailing force, so that renters don’t get crushed as workers during a recession, and then crushed again with housing costs as the economy recovers? To answer this question, we first need to understand pricing power in the rental market.

Landlords as Price Setters

A friend here in Los Angeles recently posted on Instagram about their landlord’s efforts to raise their rent: “Landlord tried to increase my rent almost 10%—talking about inflation…I threatened to move…now it’s just a $50 increase.” While this situation had a relatively good resolution—my friend was able to negotiate a smaller rent increase—it also reveals some troubling dynamics about the role of inflation and housing. 

Landlords—even small landlords—have flexibility to set prices. Moving between apartments or houses (especially in a tight housing market, especially in a pandemic) is not exactly costless, after all. As Economist J.W. Mason has noted, landlords operate from a position of market power, while tenants lack the ability to simply seek out other housing in a market of plentiful options. Further, the fraught choice of which landlord to rent from also involves choosing a neighborhood: proximity to friends and family, to work, to schools. It’s not a market of identical commodities. And, of course, since shelter is an essential good, renters cannot simply exit the market altogether. It thus falls to public policy and regulation to govern the market.

The fact that my friend was able to use their limited influence as a “good tenant” to negotiate a smaller increase also reveals the relatively autocratic form of landlord power, and consequent vulnerability of tenants to it. The landlord could make an ultimate determination of the amount of the rental price increase, and their tenant could then decide what to do: pay up, or take their chances on the treacherous rental market. 

Because landlords have price-setting power (because they “administer prices”), they can engage in what the New Deal-era economist Gardiner Means called “profit-push inflation”—widening profit margins well beyond cost increases without losing (much) market share. Means also recognized that in industries with administered pricing, price setters (landlords, in this case) will be quick to adjust prices upward but hesitant to adjust downard—what Means called “perverse pricing”. That means a stronger tendency for inflation. As the heterodox economist Fred Lee has noted, “Means concluded that perverse pricing would lead to a relatively permanent increase in administered prices.” While rental inflation did slow in 2020, by March 2021, it began to roar back

Likewise, the current bout of inflation operated as a propaganda for my friend’s landlord. And this isn’t the only sector where increased attention on inflation may be enabling further inflationary price increases. As Federal Trade Commissioner Lina Khan recently told The New York Times, “an inflationary environment can give cover to companies with market power or monopoly power to exploit that power. If prices are rising around them, then they can either, unilaterally or in a coordinated way, raise prices in ways that might not be as easily detectable, and that’s just a pure explication of their monopoly power.” 

These aspects of the market structure of rental housing makes them more vulnerable to inflation. And inflation of rental costs is particularly important to people’s daily survival, since it makes up such a large portion of household budgets. Rental price increases also underscore the need to think beyond the Federal Reserve when it comes to managing inflation. If the Fed raises rates, it will raise the costs of new home construction and the costs of renters purchasing homes—thus deepening landlord power over a limited supply of housing. So tamping down on rental inflation in particular (rather than hoping that monetary policy will take care of it) is a crucial aspect of a progressive anti-inflation policy. But what would that policy involve?

Housing Prices Beyond the Fed 

In the longer term, a primary policy goal should be to undermine the power of landlords. While many argue that this can be accomplished by targeting current zoning restrictions, landlord power won’t be sapped simply by increasing housing supply. New housing supply is one piece of the housing affordability puzzle; but as housing and urban planning scholar Ananya Roy has emphasized, simple YIMBYism of more housing supply won’t help the people most in need. Nor will it help in the here and now to address short-term, transitory inflation.

It’s for this reason that Lindsay Owens and Sammi Aibinder of the Groundwork Collaborative have recommended a combination of short-term and longer-term policy tools. To combat rent inflation in the short-term, they rightly suggest rent control; in the medium-to-longer term they recommend investments in housing supply, especially via social housing, and zoning regulation to increase the supply of affordable housing.

Rent control is also an essential tool to combat racial capitalism. Pricing power is neither uniform nor color-blind. As scholars like Keeanga-Yamahtta Taylor and Nathan Connally have shown, racial discrimination in housing has historically augmented landlord power to raise rents by creating captive markets. Today, landlords use metrics like credit scores, criminal records checks, and algorithmic tenant screenings to provide veneers of color-blindness while maintaining similarly discriminatory policies. 

As an antidote this, Tara Raghuveer, the founder of the Kansas City tenants union and leader of the Homes Guarantee campaign, views short-term struggles against landlord power as conjoined with a longer-range goals of providing a safe, accessible, and affordable home for all. “Tenant protections might seem like incrementalist fights, and they are to some degree, but we see them as stepping stones in the direction of that North Star because they fundamentally change the balance of power between landlords and tenants,” she notes. As Raghuveer has emphasized, this effort is linked with the one for a homes guarantee—the construction of 12 million social housing units: “The Homes Guarantee is… our vision to combat and dismantle racial capitalism in the context of housing and land policy.” 

Despite the roadblocks in the contemporary Senate, strong rent control at the Federal level is a particularly urgent policy avenue. We tend to forget that federal rent control existed from 1942-1953, indeed surviving longer than the Office of Price Administration, which had imposed price controls to manage inflation World War II. And it was effective at controlling housing costs during the turbulent transition period of reconversion after the War. As OPA was dismantled and inflation grew from 1945-47, with rent control remaining, historian Laura McEnaney notes that “rent for an average moderate-income family rose just over 5 percent, while clothing, which had been decontrolled after the war, rose a whopping 42 percent.” By contrast, when President Nixon used wage and price controls with relative effectiveness in the 1970s, he deliberately undermined the rent control provisions. “Tell [Chairman of the Council of Economic Advisors Paul] McCracken and [Director of Office of Management and Budget, George] Shultz to downplay rent control,” Nixon told his speechwriter. As Nixon knew from his time as an OPA staffer, when tried, federal rent control has worked. 

In 2019, Alexandria Ocasio-Cortez introduced a federal rent control provision in her “A Place to Prosper Act.” The bill would have capped rental increases at 3%, or the increase of the Consumer Price Index if it were higher. Had that law been passed, it would have assisted tenants in the economic recovery, softening the impact of the end of the childcare tax credit and other price increases in used cars and energy that are so hurting most people right now.

It’s well past time to reconsider what a just response to inflation management looks like. As Lev Menand has reminded us in this symposium, the Employment Act of 1946 commits the Federal Government to facilitate maximum employment and purchasing power. Price gouging in the rental market thus dampens purchasing power and even more so if the sole remedy is interest rate hikes. The provisional resolution to the 1970s stagflation crisis consolidated neoliberalism and slammed the door on efforts to remake domestic and global economic governance. The current inflation crisis offers an opportunity to rethink how our response to inflation can serve the most vulnerable, rather than, as we have long done, sacrifice their well-being at the altars of price stability and free markets.