The Demand And Supply Of Rent Control

1256 words (5 pages) Essay in Economics

5/12/16 Economics Reference this

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The rent controls have been used extensively in city areas of many countries as a device to hold the housing costs in check for low- income groups. In the year 1970, more than two hundred United State cities have responded with the rent controls. For example, in New York City, which had rent controls in effect during that period of World War II. In addition, in the country Paris (France)also facing the same issue. To this problem, the poor people and their advocates have pledge local government that the rents are too high . With the high rents, they are disagree to make housing prohibitively expensive for the poor and leaving them homeless. In this cases, the rent controls are a price ceiling- a maximum limit imposed on the price of a goods or services. So, through an examination of housing demand, supply and pricing will helps to evaluate the housing problems of the poor.

The Demand And Supply Of Rent Control

Rent control is an ordinance to set the price control on the rental of residential housing and it is functioning to the price ceiling. As well, rent controls have a very visible effect in making housing more affordable, but still some controls are in disequilibrium prices and this situation will change the housing decision in less visible and unintended ways. In New York City (USA) and Paris (France), some of the people are on the end of the demand curve (below the equilibrium price), they do not have extra or enough income to pay the equilibrium rent. Through this problem, they may be homeless .So that, to cure this situation, the city government will imposes a rent ceiling that is below than the equilibrium price. Following for this lower price will makes the housing more affordable for everyone than before. At the controls price, the people are willing to consumer more housing and this will cause the quantity demanded increase. On another hand, to the supplied, the rent controls do not increase the number of housing units available. Hence, on the contrary, the price controls will tend to have an opposite effect. For the example, the builders in New York City (USA) and Paris (France) will decide that the rent controls made a new construction less profitable. Through this situation, they slowly but still surely the quantity of housing will declines than before and this will be less housing for everyone when the rent controls are imposed to make housing more affordable for some. Besides that, the rent ceiling has created a housing shortage- a gap between the quantity demanded and quantity supplier. The markets will allocating available units to those consumers who are willing and able to pay the rent at equilibrium price. Thus, the price ceilings have three predictable effect, they are increase the quantity demanded and decrease the quantity supplier and this will cause or create a market shortage.

New York City (USA)

The Effect Of Rent Controls In New York City

These rent controls were maintained to some degree , although over time they have crept gradually upward. The purpose of the controls have been to keep the price of housing within the reach of lower-income groups. For example, the cost of housing is not kept down for everyone. In the normal turnover of housing units- some households vacating their apartments and other renting them. Therefore, it will becomes common to make under-the-table payment to the landlord for the privilege of a new lease. For those who are seeking housing, the search time required is a cost to the searchers. Some of those are forced to commute find their costs increase in higher then rents, direct costs of commuting and the value of the time lost in commuting. Such protection from rising rents for those who have lived in controlled apartments for long periods of time would seem to be exactly what the controls were put into effect for. Unfortunately, many who receive these advance could hardly claim them on basis of financial need. For example, it has been record that a judge in New York City’s housing court, whose job it is to enforce the city’s rent control program, rents a two-bedroom apartment for less than $100 per month, which ,if it were not rent -controlled, would bring well over $1000 per month. Examples of this is nature abound.

The Advance Use Rent Control In New York City

According to the rent controls, it is considered necessary by the New York City to protect local and provide the lesser from set a rent increase and that will cause the vulnerable people to vacate the place. So that, maintaining a supply of affordable is believe to be need to support the local society. The tenants who are support the rent controls point to the associate will caused by high rent increase. Furthermore, rent controls can affect housing investment either is positively or negatively. This is depends on how it influence the local economy and the services and tax burden. While, if instruction were the only cause driving investment in housing, and if the instruction were a negatively cause, the investment would be high in the areas with the smaller population.

Paris (France)

The Effect Of Rent Controls In Paris

The long-run profit inducement that would shift the supply curve to the right are eliminated by the rent controls. The rising household incomes that serve to increase the demand for housing also increase the demand for other goods and services .The industries producing these alternative become relatively more profitable than the housing industry in which investors cannot be capture higher returns from household. Therefore, the investors are provided with profit to increase the space available for the business relative to space available for housing. For example in Paris, between 1914 and 1950 almost no new rental housing units were constructed even through both the population and household income were rising. Furthermore, it is even possible that the rent controls may cause to the supply curve for housing units available to decrease in the long run and leaving even fewer housing units available than existed before rent controls were put in effect. Through to this ,no doubt ,the leads to an increase in the population of the homeless since less housing and homelessness must be inextricably. In addition, the another effect s of rent controls is dweller faced with rent controls tend to allow the quantity of their properties to deteriorate. For example, any given type of good or service, they are lower quality sold at the same price per units is equivalent to an increase in the price when the quality is not decreased. So the quality deterioration is a disguised stand for securing at least some price is relief. To this ,the enactment of minimum housing standards by government may block landlords from this escape route.

The Advance Use Rent Controls In Paris

Rent controls have been struggle that the housing is a “positive human right” that rival or equal the possession right of the landlords .For example ,in Paris, the rent controls were perform with stated aim or goal of appropriation the private property. If without the rent controls in a country, the dweller will playing a full rent can be make unexpectedly from their housing through no error of their own. So that, the city government establish regulation to protect some dweller from the foreclosure eviction.

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