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Rent Controls
There is nearly unanimous agreement among economists that rent controls are destructive.
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98% agreement, May 1979 and May 1992 American Economic Review agreed that “a ceiling on rents
reduces the quantity and quality of housing available.”
Over 95% agreement, Canadian Public Policy, on the same statement.
Support from left!
o Assar Linback, socialist Swedish economist said “In many cases rent control appears to be the most
efficient technique presently known to destroy a city – except for bombing.”
In 1985, approximately 20% of the population lived under rent control in over 200 separate municipalities.
Most strict in New York or 1.1 million of the city’s 1.7 million apartments are rent-controlled 63%.
How do they work?
Price ceilings
Initial and Short-term Effects
 Happy renters
 Appeals to make rents affordable to help the poor
 Unhappy landlords
Long Term Effects
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Quality deterioration
o Once rented the incentives for landlords to maintain the property diminishes
o Mortgage payments come first
o Retards investments in existing residential units
o Paul Niebanck found that 29% of rent control housing in the US is in a deteriorating condition while
only 8% of uncontrolled units are.
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Retards new investment and residential units actually limiting the supply of housing
o New investors will not enter markets when the price of output is controlled
o William Tucker found that over 30,000 apartments in New York were abandoned annually between
1972 and 1982, over 3 million units in the 11 year period of study.
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Conversion through legal system to alternative arrangements
o Condominiums
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Tenants who occupy the apartment are winners
o NYC Mayor Ed Koch pays $441.40 for a $1,200 apartment
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Anyone who wants an apartment is a loser – access to housing is restricted.
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Reduction in moving patterns “Old Lady Effect” Very similar to the effect of the homestead exemption the
state of Florida.
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Tenants often end up engaging routine maintenance.
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Shadow markets.
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Discrimination.
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As values of housing fall tax revenues for local government and infrastructure fall.
Read: PRO RENT CONTROL at http://www.globalpropertyguide.com/investment-analysis/The-pros-andcons-of-rent-control
AGAINST RENT CONTROL at http://fee.org/library/books/roofs-or-ceilings-the-current-housing-problem/
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