The Pros And Cons Of Rent Control

It is well documented and understood by economists that an increase in supply translates to a decrease in price. Consequently, a sharp decline in supply would nearly always mean a sharp increase in prices. For that reason, artificial restrictions on the supply of a certain product are mostly avoided in a healthy economy. Yet, there persist issues, where politicians do not heed the warnings of economists[1]. Being such an issue, rent control has caused grievance to many a people. Many would even argue that it provides unjust benefits to the small minority of owners while punishing those seeking new homes. In fact, due to the depreciation of money -mainly through inflation- and the smothered incentives for an increase in supply, most people find

For example, in Lansing, Michigan, the effects of rent control have been so dire and bad for the economy that the owners had a lower median income than their renters[3]. Some experts, such as B. Bruce Briggs-an urbanologist at the Hudson institute- have gone as far as to say that rent control has helped the upper middle class at the cost of the poorest[4]. Others have agreed that rent-control either does not entirely reach the intended group or simply benefits the rich(because of connections,fraud)[5][6].According to some studies, rent control might even increase homelessness albeit likely by small amounts[7]. In Los Angeles for example -according to the RAND corporation- 63% of the benefits of lower rents were offset by smaller investment in repairs and new buildings[8]. The misallocation is so great in New York City according to one study that 21% of the city’s residents live in apartments larger or smaller than they would in a free market society[9]. By having such seismic negative effects on the Housing market, rent-controls nearly always lead to the formation of slums.

The way it does so is rather straightforward. By limiting the profits, rent control disincentivizes the renter from making the necessary improvements to apartments. Furthermore, it also limits even the funds the landlord can invest to make such improvements. The more inflation rises -the less likely the owner will

Since these market methods are against present government regulations, a gray market is formed. Furthermore, it encourages renters to find ways around existing regulation. One such example are California’s rent control policies. The way the current policy works is that owners are free to increase rent as long as they rent the apartment to new owners. It is obvious why such a system would force the current owners to break their contracts in order to better manage their property. This, of course, creates the unnecessary burden of finding new tenants on a regular basis. However, the attempts to circumvent the deadly government regulations do not end there. Multiple different methods have often been used, even going as far as to rent the actual apartment key. With the formation of such informal payment methods and the reductions of supply, even the state