socialmedian: We Shouldn't Be Surprised That Rent Control Distorts Markets, Increases Non-Price Rationing

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We Shouldn't Be Surprised That Rent Control Distorts Markets, Increases Non-Price Rationing

Source: CARPE DIEM

Jul 15, 2008

Summary

Economic theory predicts that rent control laws will result in these effects (from the Gwartney textbook):
1. Shortages and black markets will develop for housing.
2. The future supply of housing will decline.
3. The quality of housing will deteriorate.
4. Non-price methods of rationing housing will increase in importance (discrimination).
5. Inefficient use of housing will result.
6. Long-term renters will benefit at the expense of newcomers.
The New York Sun article "Don't Blame Rangel for His Rent" explains why we shouldn't necessarily blame Rep. Rangel for hoarding 4 rent-controlled apartments in NYC, we should blame the rent control laws themselves for distorting housing markets and creating the adverse, inefficient outcomes outlined above:
Consider the world as it appears to owners of New York City's million-plus apartments governed by rent regulation. By definition, they are asked to take a price which is different than that which the market might dictate — in most instances (especially in Manhattan neighborhoods), likely a lower price. This essential fact is what leads Read the full article

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