Many cities in the United States and the rest of the world have rent controls.
The primary motive for rent controls is to provide affordable housing for low income people.
Most economists argue that rent controls are a lousy way to achieve that objective.
In its strictest sense, rent controls restrict the owners of housing (typically apartments) from increasing the rent they charge.
Rent controls are examples of the type of price controls known as price ceilings.
The law does not allow the price to rise above the ceiling.
The rent controlled price is necessarily below the market equilibrium price. (Otherwise, there would be no need for rent controls.)
What does supply and demand analysis suggest about the effect of imposing rent controls?
Suppose that in the absence of price controls a particular type of apartment in New York City would rent for $2,000 per month.
Suppose New York has price controls which do not permit the landlord to charge more than $1,500 per month.
In equilibrium, the number of apartments supplied at $2,000 per month equals the number of apartments demanded at that price.
At the rent-controlled price, however, the number of apartments supplied is smaller than in equilibrium.
(For example, some apartment building owners may decide to convert their buildings into condominiums or office space if they are not allowed to charge the market rent for apartments.)
The number of apartments demanded at the rent-controlled price exceeds the number of apartments supplied.
The rent controls cause a shortage of apartments.
How well do rent controls achieve the objective of providing affordable housing for low income people?
If someone is lucky enough to have a rent controlled apartment, they benefit from the policy.
In practice, however, many of the people with rent controlled apartments have middle or high incomes.
(The rents are controlled, but the apartments may be available to anyone.)
Interfering with markets by controlling prices can lead to strange results.
Is this what we had in mind when choosing to implement rent controls?
Alternatives to rent controls which might achieve the objective of providing affordable housing for low income people:
Other Information About Rent Controls
The Impact of Rent Control On The City And County of Honolulu - A Report Prepared for the Department of Housing and Community Development by London Group Realty Advisors, Inc. - August 14, 1995.
Why Rent Control Is Immoral. - an editorial by Michael S. Berliner of the Ayn Rand Institute. - September 18, 1997.
Giuliani To Lobby to Save Rent Control - from the Associated Press, May 24, 1997.
Five Myths about Rent Control - an editorial by Steven Wishnia which criticizes traditional arguments against rent controls. September 1996.
Dispelling Disinformation About Rent Controls - by Timothy Collins. May 5, 1997.
New York Political Deal Preserves Rent Controls - by Fred Kaplan, The Boston Globe. June 17, 1997.
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