question in rent control
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Some 200 American cities have rent controls designed to protect residents from high housing prices. When city governments back the price of rental housing below the equilibrium price level, the amount of housing demanded by consumers exceeds the amount that landlords are willing to make available. Answer the following questions:
What will the black market look like?
What are some of the clever strategies that landlords might use to create a black market?
How will the price ceiling effect the future supply of rental houses?
What will happen to the quality of rental housing?
Explain how the price system normally works to facilitate an efficient rationing of apartments.
What is the difference between price rationing and non-price rationing?
What non-price methods of rationing will landlords use to discern whom they should rent to?
How will efficiency and convenience be affected?
What will it be like for renters to move to other locations that are more convenient for work or family?
Who benefits the most from rent control, long-term renters, or newcomers?
In light of this discussion, what policies would you propose to promote affordable housing?
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A question in rent control is explored.
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What will the black market look like?
The housing will be provided at the price level fixed by the government, but the tenancy will have other costs hidden in it so that the actual price paid by the tenant will be equal to the equilibrium price however, that component that will actually be paid as rent will confirm to the standards set by the government. Remember, Rent Control refers to laws or ordinances that regulate how much a property can be rented for or how much rent can be increased at certain times, such as the renewal of a lease. It functions as a price ceiling in most cases. The black market defeats such control.
What are some of the clever strategies that landlords might use to create a black market?
The landlords will charge the 'rent' as equivalent to the rent that is fixed by the governement, however, they may charge 'extra' for electricity, water, cleaning services, maintenance or even development. In the United States, rent control is rare outside of cities with large tenant populations, such as New York and San Francisco. Smaller communities also have rent control, notably Santa Monica, California and many small towns in New Jersey.
How will the price ceiling effect the future supply of rental houses?
In the long run the price ceiling should lead to housing shortages in the long run. However, in reality such shortages are rare because of the black market. It is exactly because of this reason that many states in the USA have done away with rent control. In recent ...
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