IN THE USA 1.When rent control, or any price control, is imposed upon a market, four...

IN THE USA

1.When rent control, or any price control, is imposed upon a market, four alternative methods of allocation emerge to determine who gets the product or service. What are those four methods?

2.In the case of rental housing, which of the four methods may do the greatest harm to society, in your opinion? Why?

3. What is the problem that rent control attempts to solve? That is, what are the goals of rent control? Why does a pure price control fail to solve the problem?

Please discuss two of the alternative solutions to the problem. Which one of the two is superior, in your opinion? Why?

4. In your opinion, what should be done about the fact that in many years, the price of rental housing rises faster than the ability of many families to pay for this rise in housing costs?

Expert Solution

The rental accomodation market suffers from high transiction cost. Once tenant has moved in the cost of moving again are very high. Lnadlord could conceal defetcs and if the tenant complaints they threaten to raise the rent at the end of the lease. In rental control policy the lender may have right to incerase the rent wheneer they feel like and due to which the tenats might face problem.

With rent control tenants can request that hidden defects if they exist to be repaired to comply with building code reqirements withiut fearing rent increasing. Rent control could compemsate somewhat for ineffiecienies of the housing market.

Rent controls doesnt work because if you force rents down the lendors may decide not to rent the property which reduces the amount of rental property creating problem for people who are need to a rented property.

SOLUTIONS:

1. Abolition: Abolishing rent control overnight would bring many market rates onto once and would greatly reduce prices for market units

2.Vacancy Decontol: It means rent controls are enforced innapartments only until the tenant leaves. At thr time the tenant leaves the landlord is permitted to return the unit to market rates.

The 2nd is a better solution

The rent of the houses rising so fast makes it difficult for the tenents to pay and this might lead to a serious problem if not taken care of now. The government should looko in mind the peoblems of both the lenders as well as the buyers and take the action accordingly

Rahul Sunny answered 2 years ago

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