Rent Control is Out of Control - Essay Example

Rent control results in higher prices for available housing by reducing the supply. Landlords are offered little incentive to build new units that will fall under price control. Tenants have no incentive to move from a low rent situation. Elderly parents whose children have moved away may continue to live in a 4 bedroom unit to maintain the current rental rate long after space is needed. As the supply shrinks, would-be renters turn to the shadow rental market. This market, which may account for as much as 30 percent of the available housing market, exists outside the rent control laws due to special exemptions or the government's desire to maintain a relief valve for excess demand.

However, due to the short supply and high demand, these units may be priced several times higher than the market value. Housing quality also suffers under rent control. Landlords faced with limited rental income are reluctant to make improvements or even do minimum repairs. When younger renters can not find suitable housing and can't afford the shadow market they are likely to turn to a roommate arrangement which can lead to cramped quarters. As more people are unable to find affordable housing, it risks raising the homeless population or increasing occupancy in public housing.

Lifting the controls would restore market order and result in reasonably priced, higher quality units.Lifting the controls completely and immediately would not lead to all housing prices reaching the unrealistic heights of the shadow market. The market would adjust prices up to the market-clearing value and settle at the market value. There would be a short spike upward as landlords seek the optimum rental price for their property, but would soon settle back at the market price. Eliminating controls would also see an increase in construction and improvements which would feed the supply in an effort to satisfy the demand and result in lower prices in the shadow market.

Lifting rent controls makes economic sense, both for renters and landlords, but it continually comes under pressure from special interest groups intent on maintaining controls. Renters, a large voting block in major cities, are exposed to fanatical tales of rents rising to unaffordable levels in the absence of controls. Politicians cater to this block and perpetuate the myths surrounding rent control to further their own careers without regard to reason. Voters who get their economic theories from politicians are easy to convince, ready to discard any dialogue and reject the positive economic realities of abolishing rent control.