Just a few days ago, San Franciscans voted against Proposition F, a referendum that would have placed restrictions on AirBnBs and other short-term housing rentals. This type of legislation is far from unique. Fueled by arguably the United States’ most prominent housing crisis, San Francisco has enacted layers of housing laws intended to protect tenants from skyrocketing rents, arbitrary evictions, and diminished rental supplies. Notable examples include laws governing rent controls (landlords have little ability to raise rents), market exoduses (the Ellis Act often incentives landlords to withdraw from the San Francisco rental market for five years), and buyout restrictions (landlords face numerous obstacles in buying out a tenant’s lease). Although the motives behind these statutes is admirable—considering affordable housing’s position as a social justice issue—many housing laws intended to benefit tenants are misguided, harming both tenants and landlords.

The folly of housing laws is neatly described by an economics term known as the “cobra effect,” which refers to solutions that exacerbate an original problem. The term was coined after cobras overran Delhi, prompting city officials to issue bounties for each killed cobra. Upon learning that local residents had begun farming cobras to generate additional bounties, city officials terminated the program. Left with no use for their farm-raised cobras, residents released their snakes back into the city, creating a far greater cobra crisis. It seems that a similar cobra effect is attributable to urban housing statutes, which—despite their remedial intent—are actually causing rents to rise.

The problem is this: many remedial laws ignore the economics of human behavior. In response to new incentives, rational actors typically adjust their behaviors as opposed to remaining passive. Landlords are no different. Take rent controls for example, which prevent landlords from raising a unit’s rental price. While ostensibly protecting tenants, they also produce unintended consequences by raising rents on future tenants. This is because, knowing that rental rates generally increase over time, landlords tend to charge more upfront to compensate for future years of below-market rent income. For instance, if a unit’s current price is $800, but may rise to $1,200 in five years, a landlord is likely charge $1,000 upfront to mitigate the lost profits occurring in years four and five of the lease (assuming that tenants typically remain for five years). This is why rent control laws can generate rate increases that exceed what the market would have otherwise rendered.

A related problem concerns the propensity of landlords to completely abandon rental markets due to the burdens of inflexible rental laws. An alternative landlord strategy which avoids a complete marketplace withdrawal is to reject yearlong leases in favor of short-term rentals such as AirBnBs. Since squatter rights take effect only after 30 days of occupancy, opting for short-term rentals sidesteps certain landlord/tenant laws. This later trend was the impetus behind the now-defeated Proposition F. And as economics tells us, when a good’s supply decreases (e.g., standard yearlong leases) while demand stays constant, prices rise.

I’m not suggesting that all remedial housing laws are entirely bad and that unfettered free markets are always preferable. For instance, I would argue that a law vesting tenants with the right to sublease their apartment’s unused bedrooms would be a great law (i.e., a singular renter living in a three bedroom apartment could co-lease to two additional individuals). It would increase the number of rental leases on a market without overly burdening landlords; and when supply goes up, prices go down. The lesson to be learned is that remedial (housing) laws must consider the manner in which rational actors respond to incentives (i.e., laws) or else suffer the likelihood of making a crisis worse.