Can Government Help When Rents Are Too High?

When rents rise faster than wages, governments often feel pressure to step in.

The goal is simple: make housing more affordable. The results, however, are often more complicated.

Recent examples from Argentina and Sweden show how rent controls can lower costs for some tenants while creating shortages, long waiting lists, and fewer available homes.

Argentina adopted strict rental rules in 2020. The law required three-year leases, set rents in pesos, and allowed only one rent adjustment per year using a government formula.

The law did not directly cap the starting rent, but inflation was running at about 3.5% per month. That made it difficult for landlords to keep pace with rising costs.

Some responded by setting very high rents at the beginning of a lease to protect themselves against future inflation. Others removed properties from the rental market.

By late 2023, about one in seven homes was reportedly sitting empty while renters competed for a shrinking number of available leases.

Sweden took a different approach.

Rents there are generally negotiated between landlord groups and tenant unions rather than frozen by law. Controlled rents can be 30% to 50% below open-market rates.

That has helped many tenants who already have regulated apartments. But it has also created a serious shortage.

According to the BBC, the wait for a controlled apartment in Stockholm is close to nine years.

A second-hand rental market emerged to fill the gap. Tenants with regulated apartments sometimes sublet them at much higher prices.

An apartment renting for about 6,000 kronor under the regulated system might be sublet for 11,000 kronor on the secondary market.

Sweden has moved to restrict that practice, but other problems remain.

Landlords may be allowed to raise rents after renovations. Critics say that has encouraged some owners to carry out costly upgrades that push out lower-income tenants, a practice sometimes called “renoviction.”

At the same time, landlords may delay ordinary repairs because those improvements do not bring the same financial return.

The two countries used different systems, but both faced a similar problem: neither policy created more housing.

In Argentina, owners left the rental market.

In Sweden, many apartments remained occupied by people unwilling to give up below-market leases, while new renters faced years-long waits.

Argentina reversed course in December 2023, repealing the 2020 rental law.

According to The Wall Street Journal, rental listings in Buenos Aires then rose by more than 170%, while inflation-adjusted rents fell by about 40%.

Supporters of deregulation pointed to the change as evidence that increasing supply can bring rents down more effectively than restricting prices.

That does not mean every housing market will respond the same way.

Rents are shaped by many factors, including construction costs, zoning laws, interest rates, population growth, wages, taxes, and the number of homes available.

Rent controls can provide immediate relief to some tenants, especially those at risk of sudden increases or displacement.

But if landlords stop renting, builders stop building, or existing tenants never move, the long-term result may be fewer choices for everyone else.

The larger lesson is that affordability and supply are closely connected.

Rules that protect tenants may help in the short term, but lasting relief usually requires more homes, faster construction, and fewer barriers to adding apartments where people want to live.

The government can help when rents are too high.

But the strongest results may come not from controlling the price of existing housing, but from making it easier to create more of it.