Rent control and market intervention - pros and cons

[dj023102]

Rent control are often used as a popular market intervention, particularly in periods of inflation and where tenants outnumber owners. What are the short-run and long-run implications of introducing such controls?
Any help would be appreicated. Thanks

 

[russ_watters]

This sounds like homework. What do you think the answers are?

 

[dj023102]

Well i thought the short run implications would be that search activity would occur and a black market arises. A dead weight loss would also occur and generally it would result in shortage of rent accomdation. also though they do lower the rent for some they raise the rent for others. The only winners of rent control are the people who are able to get the lower rents. i am not sure how to explain the long run of rent control.

Am i going in the right direction with this?

 

[montoyas7940]

What do you think would happen to the condition of the buildings over time?

 

[dj023102]

over time the building conditions would deterioate i am guessing and landlords would force tenants to pay a high price to fix and re condition the buildings.

 

[russ_watters]

Well rent control means they can't force the tenants to pay a higher price...

I think you are going in the right direction. Googling "rent control theory" gets a lot of hits to good articles. Some are subscription only, but you may be able to get them through your library. There is a lot of info out there.

 

[Dale]

IMO, rent control is a bad idea. If housing prices are high then there is a shortage of housing. If prices are artificially kept low then there will be no increase in supply. In other words, the real problem is the short supply (the high price is just a symptom) and rent control ensures that the problem never gets solved.

Price gouging is generally a good thing.

 

[kmarinas86]

Apartment rent is ridiculous. Where I live, you can pay $1100/month for a tiny 1000 sqft apartment, or you can pay $500/month for a $200,000 house with around 2,000 sqft. I know the utilities of apartments have to be cheaper than for a big house. Why the hell are apartments more expensive then? They should be a hell of a lot cheaper. Something simply doesn't add up.