Rent controls force landlords to price apartments below the equilibrium price level. An immediate effect is...

Rent controls force landlords to price apartments below the equilibrium price level. An immediate effect is a shortage (excess demand) of apartments, because the quantity of apartments demanded is greater than the quantity supplied at the regulated price.

When cities prevent landlords from charging market rents, which of the following are common long-run outcomes? Check all that apply.

a) Black markets develop.

b) The quantity of available rental housing units falls.

c) The future supply of rental housing units increases.

d) The quality of rental housing units falls.

Expert Solution

Following are the common long run outcomes of rent control on the housing.

- Black markets develop (Non- price method of rationing emerge )

- The quantity of available rental housing units falls: By inforcing rents below the market price, rent control reduces the profitability of rental housing, leads to outflow of investment from the rental market. Hence, neither new investment in the rental market take place and the existing investment driven out from the rental market. Therefore, the quantity of available rental housing units falls.

Answer: Option (A) and Option (B).

Rahul Sunny answered 2 years ago

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