Rent Control: Pros and Cons
Rent control is the government imposition of price ceilings on rent for
apartments in certain areas of a city. The goal is usually to protect the rights
of the poor. Thus, in a rent controlled or rent stabilized building, the amount
of rent will not increase as quickly as inflation. While the moral side of rent
control may have some appeal, in the long run the disadvantages far outweigh the
advantages.
Those who argue in favor of rent control say that it is the only way to protect
lower-income tenants from landlords who overprice, and from being forced to move
out of a neighborhood because they cannot afford the rent. Limiting the price
that a landlord can demand helps maintain a city's ethnic diversity and prevents
the creation of slums on the outskirts of the main city. Another thing that
proponents say is that by linking rent prices to apartment maintenance and
material improvements, rent control actually improves the state of housing.
Overall, they argue that the goals of rent control can be reached if they are
administered in a careful and just way.
The opponents, though, have both theoretical and practical experience on their
side. First, rent control creates a market that is unfair for everyone. Since
the rent is set at a lower than normal level, an unsatisfied demand is created.
This increase in demand leads to an increase in the cost of rents in the
uncontrolled sector. Thus, two types of rents are created: those that are
unfairly cheap, and those that are unfairly expensive.
Another problem that is created is that landlords who own rent controlled
apartments are often not able to earn enough money to adequately maintain
buildings. This leads to run-down, poor quality housing. In many cases,
landlords lose so much money that they are not able to even pay the debt on the
properties, and they abandon them. Both of these effects have been documented in
New York and elsewhere, and go against the goals of rent control.
Finally, rent control has the bad side effect of turning away new construction.
This is because even if rent controls don't include new constructions, owners
are afraid to build any new buildings if in a few years those too will be taken
over by rent control. Rent control thus leads to less construction and an even
greater unsatisfied demand. This, in turn, increases the rents of uncontrolled
apartments even more. New constructions are also avoided because banks and
insurance companies don't want to invest in areas where rent control is in
effect, because they know that it is likely that landlords will not be able to
pay for the building, and they will lose their investment.
posted by BarbieSkySwensson @ 9:25 PM
0 comments
