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Pros And Cons Of Rent Control

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5. Benefit/loss from the introduction of rent control The impact of rent control depends upon the relative proportion of the controlled and the uncontrolled markets in the rental housing market. If a large proportion of the market were uncontrolled, then the impact of the rent control would obviously be minimal. But if a large proportion is controlled, then rent control could have devastating effects. Demand will necessarily exceed supply in the controlled market. Those unable to find homes will invariably move to the uncontrolled sector for bidding up rents. Thus, rent controls will actually cause a majority of the people seeking rental accommodation to pay higher rents than they would have paid in absence of rent controls. Fixation of standard/fair rent as a percentage of the cost of construction is a major disincentive for those wanting to invest in rental housing as it gives a very low rate of return as compared to other assets. The low rate …show more content…

The distortion increases as the gap between frozen rent and market rent widens. Rent controls are a form of subsidy extracted from landlords and paid to tenants. They discourage the supply of new rental housing and housing shortage results in excess demand. Rent control makes housing less affordable to anyone seeking housing in a rent-controlled market. Even people who already have a "great deal" under rent control become prisoners of their own apartment. A raging debate has been going on over the years over the pros and cons of rent control. While the proponents of rent control laws suggest that they prevent landlords from charging exorbitant rents and evicting tenants at will, the opponents suggest that rent control laws, by distorting incentives, lead to deterioration of existing housing stock, increased pullout of apartments from the rental housing market and reduced overall supply. Therefore, rent control should be

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