Advantages And Disadvantages Of Rent Control
Article: Do rent controls work?
This article briefly disputes the consequences of rent regulation. It can be argued that it is beneficial, but it is also important to consider why it may not be. The article begins by addressing two different forms of rent regulation, first of which is known as rent control. Rent control essentially places a cap on how much can be charged for rent. The second form of regulation is known as rent stabilisation which sets limits on how much rent can be raised over time.
The article begins by addressing how introducing controls will help ensure that households on low and middle incomes will not be forced out of cities that are experiencing extremely high costs. These high costs have been experienced …show more content…
Households with lower incomes feel as though they are being disregarded due to neighbourhood standards. With a rent regulation system in effect, the housing market may be more fair and prevent low income renters from being excluded.
Although there is strong evidence to support the regulation of rent, this article also discusses why economists disagree. The article quotes Paul Krugman in 2000 when he wrote his opinion regarding rent control. He believes rent control is an understood issue, but is the least controversial. The economist highlights the disadvantages of rent regulation as it does not see the benefits outweighing the costs.
A significant disadvantage to rent regulation is the lack of property maintenance and restoration given a price cap. If rent is controlled, landlords will have less incentive to compete with one another because the potential to earn more money is no longer possible. More consequences include renters staying longer than necessary in order to take advantage of the price cap. This can be observed when looking at those living in rent-controlled flats in New York. Higher median income renters have been taking advantage of these flats rather than the lower income renters that the price cap was intended …show more content…
In chapter two we discussed price ceilings and price floors. A price ceiling is the maximum legal price that can be charged, and a price floor is the minimum legal price that can be charged. Rent regulation is an example of placing a price ceiling on the real estate market. Regulating rent means setting a maximum legal price that can be charged.
The government typically sets a price ceiling in an attempt to help certain low income populations. In the case of rent regulation, the article lists the many ways it is beneficial to low income populations. The article also mentions the side effects of placing a price ceiling which we also learned about in Chapter 2.
As discussed in class, price ceilings may result in a shortage of quantity available. Considering that rent will be lower and a greater number of households will be able to afford it, there will be a shortage of available properties to rent. So although the price ceiling will help low income households, in the long run there may be a shortage of properties. In addition to the shortage, the economist mentions there may be a lower incentive to maintain the properties that do