Stemming from a (seemingly) recent discussion forum dwellers had about the minimum wage, I was curious about rent control:

1. Is Rent Control a good or bad thing?

2. What are the economic effects of having rent control?

3. If Rent Control is a good thing, should all housing be covered by some degree of rent control?

1. Is Rent Control a good or bad thing?

2. What are the economic effects of having rent control?

3. If Rent Control is a good thing, should all housing be covered by some degree of rent control?

Rent Controls are wrong. Complete violation of property rights and is basically theft. Forced by others to determine the fair value of your property. For all attempts to somehow portray it in a morally justifiable light it is a form of extortion.

1. Is Rent Control a good or bad thing?

Definitely good! For instance, I was recently thinking of moving to Spain, to live and work there, but the minimum wage is 550 euro a month, and the cost of renting an apartment varies a lot, but a very small place to 300 Euro a month is not uncommon. This leaves 250 for ALL expenses, which is virtually impossible to survive on.
This forces the Spanish to work like crazy, 50-60 hours a week a pretty normal. People have very often at least 2 jobs, and with all the immigrants coming in from the south, unemployment rates are soaring at this moment.
Young people live with their parents until they are 30-40 years old, and the birthrate just keeps falling, no one can afford to have babies.


2. What are the economic effects of having rent control?

To me it seems natural, that the minimum wage and the rent control should be balanced with each other.

3. If Rent Control is a good thing, should all housing be covered by some degree of rent control?

Yes. You can never rely on the government to build enough low cost housing, it has simply never happened in history. There is always a shortage of housing for the low income people, which forces them into the arms of greedy house owners.

1. Bad thing. Except for very narrow and very limited reasons and spans of time Rent Control is not the answer.

2. Kills competition.

3. No housing should ever be price controlled.

Can you explain better or provide a link to the mechanism of rent control- I am not sure how it works, and how the property owner is rewarded for his investment?

Rent Control

Price Ceiling

A simple example: A landlord charges $800 dollars a month to all of his tenants, until a law is passed proclaiming no apartment can be rented for more than $400 a month. The landlord, therefore, lowers his price to $400 for every tenant. However, other forms exist, such as those regulating how much a landlord can increase his rent per month (generally a percentage).

The general idea is to reduce exploitation by landlords who extol large sums from such necessary property as living quarters.

1. Is Rent Control a good or bad thing?

2. What are the economic effects of having rent control?

3. If Rent Control is a good thing, should all housing be covered by some degree of rent control?

I don't believe you can outright declare rent control a good or bad thing in all circumstances, as most of the above posters have done. That kind of one-sided thinking is either idolatry of or contempt for the so-called "free market system."

I live in a rent controlled place, in Manhattan now, and I'll say this: everybody who visits the city of new york, and the millions of new yorkers who benefit from that influx of tourism cash should thank the smog-covered stars for the city's rent control laws. Sure, the small minority of property owners who dominate Manhattan real estate are not making the money they could be. But New York as a cultural and economic center could not be possible without say, the towering tenements that make china town affordable for first generation Chinese. Or, another example, the low-cost housing in Stuyvesant town that allow deli owners, shoe repairmen, pizza parlor owners, etc. to live within a reasonable distance of their small businesses.

In fact, I think New York needs even more rent control laws. Whats happening to the city now is particularly destructive: waves of gentrification are forcing students out of the east village into Puerto Rican Williamsburg, where the Puerto Ricans are being forced out further into Brooklyn and Queens, forcing other immigrant groups further from the economic opportunities in Manhattan.

In turn rents have skyrocketed, making it difficult for small, young businesses to gain a foothold in many parts of Brooklyn and Manhattan. This is particularly illustrated by the number of chains -- footlocker, whole foods, k-mart, target, ikea -- that are taking over the cities economics.

I happen to believe that this is a terrible development for the city. It means we are a city of far more employees than ever before, and far fewer small business owners-- in other words, new york, the city of opportunity, has now become a center of opportunity only for college students whose parents can afford to bankroll their Manhattan rent, while they search for internships in the arts, the financial community, whatever. The enormous numbers in which Blacks have left the city for the South partly illustrates that point.

So I think New York is losing its viability due to the free market system as a few posters have clumsily applied it to rent control politics. Meaning that, in the free market of cities wherein local governments try to attract more businesses and more residents, I think New York has every right -- even a responsibility -- to push for rent control laws that will make the city a better society for business, culture, tourism and immigration.

But feel free to write: "The Rent Control system is evil. It cheats property owners," or "The rent control system is great! It makes life affordable." Geniuses.

forgive me, but I know very little about this subject- I have heard it before, but definately sets off alot of bells here

1. Is Rent Control a good or bad thing?

From the discription, I would say bad, bad, bad. When you are talking about property- that is truly the thing that sets us so very, very different than other developed nations- we are a nation of homeowners, and not just "flats"- but real houses- that is truly what makes USA so very different than Euro-western countries.

IF- Drewdorkytimes- the city needs to be "saved"- the market will cover that quite nicely in this realm. Once those types of changes you mentioned, immigrants moving farther out, etc- the market, will, eventually- adjust. At some point, Manhatten will price itself right out of the market- and I dare say that those "small percentages" that own most of Manhatten would find themselves trying to unload some worthless property at some point, and the new developer would have to deal with the new realities.

2. What are the economic effects of having rent control?

None, zero, zip, nada- artifcle contructs such as rent control are harmful, because, it pretty much codifies those "small number of rich landowners" into existance- if, those areas were allowed to fail per the usual market practise, and fall into decline- a smart investor would pick it up and move it back into the new paradigm that exists for that city. Yes, Pizzarias and such would move or fail- as they should- making it too possible to stay in business by subsidizing thier living quarters does no good, in the long run, to the city.

At some point, especially with commercial property- long term leases would be sold at a reduced prices to entice renters by a landlord- NOT a goverment.

That is the way it usually happens anyway, in most cities. Now- that does NOT mean I believe that there shouldn't be regulations, safety and capacity regulations, Zoning etc- I want a balance here

but the govermetn setting rent is bad, very bad.

3. If Rent Control is a good thing, should all housing be covered by some degree of rent control?

NO, I guess this question is N/A

Thanks DrewYork its about time it was recognized.
as for poor NYC somehow being diminished by losing the strong arm tactics of rent control--or "We will Tell you how to Live and Think" Doubtful. As Cruising Ram mentioned if NYC becomes overpriced it will lose out and be forced by the market to go to a reasonable set of rates. Bemoaning the loss of tenements/slums? Not much of a loss. Simply put it is no one's responsibility to foot the bill for the lifestyle of others. That is all rent control is. Strong arm tactics to force others to pay for the desires of others.
NYC is the greatest city ever, anywhere and anytime--ever. It will survive the return of private property rights to the owners of the property and away from the greed of others who cant afford what they desire and force others to pay their way.


Good. Never have liked most small shops which are generally full of goods priced higher than they are worth.
Makes no sense buying something for more than it is worth, just because of some supposed independent charm. There will always be plenty of places for people who have a mental need to be "Trendy".
Besides if it forces people out you will merely have a new place and location evolve into the "IT" spot. one with its own flavor and style and not another carbon copy of what has already been done to death.
who really wants stagnation?

Chris- one caveat to this is the corruption of the NYC real estate market as well- I am not sure if it plays into this or not still, but for a long time, the mob basically approved property sales, and there was a real problem with slum lords not keeping thier buildings up to code, and getting away with it- that I have a problem with, and some of the rent issues would be solved IMHO if the market is truly "free and fair"- frequently, that is not the case, it is just a cover for wrongdoing.

As a libertarian, I am a firm believer in enforcing existing laws instead of confiscation laws like this.

Just make sure the market is truly free and fair- and go from there.

1. Is Rent Control a good or bad thing?

A bad thing.
2. What are the economic effects of having rent control?
It often keeps the income from property too low and therefore takes away any incentive to expand/improve property. What you end up with are slums – dumps that people stay in to take advantage of the low price.

Rent control has been in force in a number of major American cities for many decades. The best-known example is New York, which still retains rent controls from the temporary price controls imposed during World War II. But this policy, meant to assist poorer residents, harms far more citizens than it helps, benefits the better-off, and limits the freedom of all citizens.
A look at the classified ads in rent-controlled cities reveals that very few moderately priced rental units are actually available. Most advertised units are priced well above the actual median rent. Yet in cities without controls, moderately priced units are universally available.
In many cities, policymakers understand that controls drive out residents and businesses. Thus many exempt significant portions of housing from controls, creating shadow markets. Yet as controls hold down rents for some units, costs for all other rental housing skyrockets. And tenants in rent-controlled units fear moving to more desirable neighborhoods since the only units available for rent are very high-priced.
But the trend in recent years has been toward removal of rent control. The repeal of controls in Massachusetts, for example, did not lead to the widespread evictions and hardships that some predicted. The lesson for the rest of the country is that rent control is policy that never was justified and certainly should be scrapped.

http://www.cato.org/pubs/pas/pa-274es.html

Rent Control is good...whatever happened to fair rent prices..its ridiculous that s studio apt in a big city costs $1500 a month...who the heck would go for that?....better to pay a mortgage!

no bad economic effects, just stemming the greed of some landlords who think they can get rich quick off of tenants...and saves more money for the tenants, so it would actually be good for the economy

Sometimes I wonder about that libertarian comment...
However, the point of a free market is that consumers dollars dictate where they live. When rent control is present, it forces the introduction of alternatives to not exist. For instance, why would a new entrant to the market appear if they were forced to rent at or below cost? Why would a land lord upgrade the building when he/she cannot increase the profitability? Rent is definitely a demand based chain. This is why the apartments in NYC can cost $2K in Manhattan for 900 sq ft. Being from Texas, even hotel rooms make me feel cramped in Manhattan. However, people CHOOSE to pay those ridiculous rates. They could move to the Bronx, or New Jersey and take the train can't they? The same apt in NJ would cost 1/2 or 2/3 that much. Sure, you'd have to commute, etc. That's WHY the premium exists. I have to even admit that I don't mind waking up, leaving the hotel, grabbing a cup of coffee and letting the 3 Train do the driving... and this coming from a self avowed country boy. I see why people live in the city and pay extra is all I'm saying. Heck, our house in N. Dallas would've cost $25-35K less had we moved to a more nothern suburb like Allen or Mckinney (or even less if we'd moved east to Rockwall or Rowlett).
What do economists say?

http://www.econlib.org/library/Enc/RentControl.html



Think of it like "hamburger control". If hamburger places could only charge $2 for a hamburger meal that cost $1.75 to make, what would you expect to get? Would more hamburger places spring up everywhere trying to get that magical $.25 profit? What if they could charge what the market dictated and that was $5? Would you get a better burger and service if the profit were $3.25 as opposed to $0.25? Hmmm...

Why Americans don't understand simple capitalism is beyond me. Codes complaince issues, corrupt landlords, etc can happen regardless of the system. That's a regulatory issue. Do you think North Koreans live in beautiful, well maintained homes? Did the Russians during communism? Of course not.

I think the hamburger analogy is perhaps not the best illustration. Hamburger prices are subject to fluctuating market changes, as in the cost of lettuce, buns, tomatos, ketchup, etc. Whereas, many buildings that are subject to rent control have already been paid off, and the only costs associated with those buildings are general upkeep and maintenance. This means that the owner of the apartment, or whatever, is making a large sum of money for relatively little "work." In essense, the costs associated with building upkeep are not as vulnerable to market changes...Because its only a few factors that come into play with buildings, whereas with hamburgers there are more things subject to market forces. In this sense, rent control really doesnt hurt the owner, because he will always be making a profit (assuming he already owns the actual property, instead of paying it off)...I dont know if I really made any sense.

Yes, you make sense but I think you've missed out on a handful of notes that the economists mentioned (from my link) as well as some that I'll bring up.

- Hamburgers or widgets X are the same story. Decreased profitability and lack of competition always decreases the need for quality product, which eventually causes huge revenue downfalls in a market with alternatives (see US auto industry circa 1984)
- Rent control causes a lack of new entrants into markets, which decreases competition and thus always decreases efficiency
- Landlords will always have to pay taxes on the bldg's, pay for maintenance people and products, and for necessary renovation which is subject to the cost of inflation and varying market conditions
- Codes compliance issues can happen regardless of market strategy or government pricing intervention
- Artifical price constraints have never been proven to positively influce any US industry, and on numerous occasions to the contrary.

America, as all relatively capitalist societies, has pros and cons to its economic strategy. Unfortunately, in large cities, poor people have a hard time finding affordable housing close to work. This complicates matters in that it causes issues with the cost of commuting, etc. That's even true in Dallas, and at times even within my own company. All of the good jobs are in the part of town where housing costs more. That's probably a relatively true statement worldwide.

1. Is Rent Control a good or bad thing?

In markets where property values and rents are exhorbitant, I think it can be a good thing. Since rent control only applies to the tenant occupying the unit, it doesn’t prevent the landlord from raising the rents sky high when that person moves, I don’t see what all the fuss is about. Landlords are hardly the poor, downtrodden in this country. The problem they have is long-term tenants that never move, and landlords have ways of making their lives miserable enough that they consider moving. This victimizes the least able among us to protect themselves (the elderly, single moms, etc.).

2. What are the economic effects of having rent control?

I don’t know. Landlords hate it because it narrows their profit margins.

3. If Rent Control is a good thing, should all housing be covered by some degree of rent control?

I think there should be some limits on what can be charged for a rental. I don’t know what formula to use however. When a crappy 400 square foot apartment in NYC rents for thousands, that’s a problem. When the average rent in Los Angeles exceeds the average income, that’s a problem. Affordable housing has to be an option.



I don’t know about other states, but in California, all rent control means is that you are limited as to the percentage and frequency a landlord can raise rents, but I've never heard of a "ceiling". When a rent control tenant moves, the landlord can charge market value for the new tenants.

You argue here on two levels. Landlords can make money IF people leave but they don’t and we need to protect them so they can – and as a result landlords make no money and…………………….. Bottom line is poor housing and little of it as discussed above.




Again as covered above all that is required to lower prices, improve housing and availability is competition. With rent control there is no increase in units since it is not worth it to build more with rents held low. Without controls then units are built and the rents drop via competition. Most economists have always agreed rent control is bad practice.

“The Effects of Rent Control

Economists are virtually unanimous in the conclusion that rent controls are destructive. In a late-seventies poll of 211 economists published in the May 1979 issue of American Economic Review, slightly more than 98 percent of U.S. respondents agreed that "a ceiling on rents reduces the quantity and quality of housing available." Similarly, the June 1988 issue of Canadian Public Policy reported that over 95 percent of the Canadian economists polled agreed with the statement. The agreement cuts across the usual political spectrum, ranging all the way from Nobel Prize winners Milton Friedman and Friedrich Hayek on the "right" to their fellow Nobel Laureate Gunnar Myrdal, an important architect of the Swedish Labor Party's welfare state, on the "left." Myrdal stated, "Rent control has in certain Western countries constituted, maybe, the worst example of poor planning by governments lacking courage and vision." Fellow Swedish economist (and socialist) Assar Lindbeck, asserted, "In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing."
Economists have shown that rent control diverts new investment, which would otherwise have gone to rental housing, toward other, greener pastures—greener in terms of consumer need. They have demonstrated that it leads to housing deterioration, to fewer repairs and less maintenance. For example, Paul Niebanck reports that 29 percent of rent-controlled housing in the United States is deteriorated, but only 8 percent of the uncontrolled units are in such a state of disrepair. Joel Brenner and Herbert Franklin cite similar statistics for England and France.
The economic reasons are straightforward. One effect of government oversight is to retard investment in residential rental units. Imagine that you have $5 million to invest and can place the funds in any industry you wish. In most businesses governments will place only limited controls and taxes on your enterprise. But if you entrust your money to rental housing, you must pass one additional hurdle: the rent-control authority, with its hearings, red tape, and rent ceilings. Under these conditions is it any wonder that you are less likely to build or purchase rental housing? “

http://www.econlib.org/library/Enc/RentControl.html