In: Economics
Please read the instructions and find attached for the first wiki .
Instructions for students:
Read carefully the attached document and then post your comments bearing in mind the following questions:
1- What are the pros and cons of rent controls?
2- Why economists disagree on the usefulness of rent control?
3- Do you believe rent control can help the poor?
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rent control
Rent regulation can take various forms, including rent control (the placing of a cap on the rent that can be charged) and rent stabilisation (setting limits on how much rent can be raised over time). Supporters argue that introducing controls helps ensure that households on low and middle incomes are not squeezed out of cities in which housing costs are soaring. In many booming cities, growth has pushed up rents, and over time the composition of many neighbourhoods has changed in favour of those who can afford higher prices. Supporters of rent control often point to Germany, where it is illegal to charge rent more than 20% above the level charged for a comparable property. (Around 50% of people rent their housing in Germany; almost 90% of all Berliners do, many in pleasingly spacious, well-looked-after apartments.) In the ten years to 2014, the proportion of British households headed by someone aged between 25 and 34 which rented privately rose from 22% to 44%. In Seattle, rents for one-bedroom apartments increased by nearly 11% between 2010 and 2013. A case could be made that rent controls provide long-term security for renters, and tilt the balance of power away from landlords towards tenants. That, some reckon, makes for a fairer housing market, in which households with lower incomes cannot easily be pushed aside by landlords keen to "gentrify" the neighbourhood.
(3)
Some locaities in California and New York are still using Rent Control but nationwide, the majority have abolished such regulations following policy advice from academic scholars and practitioners who used statistical analysis to prove that rent control reduces housing supply and qualities.
So if rent control hurts tenants and landlords, who does it help? Unfortunately, rent control is a political tool more than anything else. At face value, it sounds like it would help the poor, but often -
Rent control has several pros and cons, but as can be gleaned
from the essay - it is used more often as a political tool than a
weapon to aid the masses. One of the advantages of rent control is
that affordable housing will be made available to middle class or
lower class families who cannot usually afford homes in posh
localities. Another advantage is that workers can often get houses
on rent near their place of work reducing commute time and cost. As
mentioned in the Wiki, rent control provides long-term security to
tenants and shifts the power to create a balance between landlords
and tenants. However, the pros work in an ideal world, while the
cons can be seen in many cities where rent control was implemented.
Since landlords only make minimum profit, it is likely that they
won't bother with the upkeep, only doing the bare minimum.
Corruption will run rampant, and landlords will either rent to
their friends or family, or will sublet at higher prices
illegally.
Economists disagree with rent control partly because cities where
rent control was implemented were analysed and it was observed
(through statistical analysis) that rent control reduces housing
supplies and quality. Policies intended to help the poor backfire
and rent control is an example of that. "According to the basic
theory of supply and demand, rent control causes housing shortages
that reduce the number of low-income people who can live in a city.
Even worse, rent control will raise demand for housing, thereby
increasing rent, in other areas." While a few people benefit from
rent control, the policy does more harm than good to a city.
Hope this helped!