A number of communities around
the country continue to impose rent controls, usually with the stated goal of
preserving affordable housing for low- income and middle-income families. In
order to let more people can able to rent house, the government would sets the
rent ceiling price below the equilibrium price in housing market. Why should
rent ceiling set below the equilibrium price not set above? The reason is if
government sets the rent ceiling above equilibrium price, people will need to pay more for rent housing. Thus, if
rent ceiling set above the equilibrium price in housing market has no effects.
However, once the rent ceiling sets below the equilibrium price in housing
market has powerful effects due to rental of housing decline that makes a great
number of people be affordable.
Diagram 1
Diagram 1
Rent control does not advance
this important goal. To the contrary, in many communities rent control has
actually reduced quantity of available housing. We can see from diagram.1, when
the rent is at the equilibrium level, the quantity of housing supplied equals
the quantity of housing demanded and there is neither a shortage nor a surplus.
But, at a rent set below the equilibrium rent, the quantity of housing demanded
exceeds the quantity of housing supplied. Thus, there is a shortage in housing
market. In a tight market, there are
some people looking for housing than available rental units, at this case the
black market will be created. The level of a black market rent depends on how
tightly the rent ceiling is enforced. With loose enforcement, the black market
rent is close to the unregulated rent. But with strict enforcement, the black
market rent is equal to the maximum price that a renter is willing to pay. (We also
can see the maximum black market price from graph.1)
The
Substantial Costs of Rent Control Fall Most Heavily on the Poor. The
costs of rent control fall disproportionately on the poor. Poor families suffer
a marked decline in existing housing as the quality of existing housing falls
in response to reduced maintenance expenditures. The middle class can move out;
for many reasons, poorer families lack this option. In an unregulated market,
this consumer selection process will be governed by the level of rents.
However, by restricting rent levels rent control causes housing providers to
turn to other factors, such as income and credit history, to choose among
competing consumers. These factors tend to bias the selection process against
low income families, particularly female- headed, single-parent households. At
this situation, people probably have to pay more than rent ceiling price that
would let people receive surplus. It’s consumer surplus, show by
diagram.2. Poor families also are at
substantial disadvantages when it comes to finding new housing. In a tight
market, there may be more people looking for housing than available rental
units, thereby giving housing providers substantial discretion in choosing
among competing potential consumers. So, renters would pay more time for
searching the housing that would makes people have loss from housing search,
show by diagram.2.
Higher Income Households Benefit Most from
Rent Controls. Rent control is most often justified as an
anti-poverty strategy. Yet, there is strong evidence that higher income
households are the principal beneficiaries of most rent control
laws, not the poor. For example, a study of rent control in New York City found
that rent-controlled households with incomes greater than $75,000 received
nearly twice the average subsidy of rent-controlled households with incomes
below $10,000. So, that would makes a producer surplus in housing market ( It
show by diagram.2) due to some
households just willing to lend their house at illegal market, that means the
rental is more than the rent ceiling price. Therefore, in
America 93 percent of economists agreed that a ceiling on rents reduces the
quantity of housing available, so there is a deadweight loss (Show by
diagram.2) in housing market because the quantity of housing supplied is less
than the efficient quantity.
In addition, Rent ceiling is unfair as rent
control promote housing discrimination. By eliminating
rents as the basis of choosing among a pool of potential consumers, rent
control opens the door to discrimination based on other factors. As noted
earlier, rent control forces housing providers to look to income and credit
history in choosing among competing consumers, factors which sharply bias the
selection process against poor and young consumers. In some cases, consumer
selection decisions also may be based on a potential consumer's race, sex,
family size or other improper or unlawful factors. There is another unfair of
rent control is Rent Controls Unfairly Tax Rental Housing
Providers. Rent
controls are designed to supplement consumer income at the expense of rental
property providers, by holding below market levels the permissible rate of
return on rental property investment. There is substantial evidence that such
transfers are highly inefficient. For example, housing consumers gained in
benefits only 52 percent of what housing providers lost. So, the tax
would on the households. This is due, in part, to the tendency of
consumers in rent-controlled units to "hoard" housing and to be
over-housed, a tendency that further exacerbates the underlying housing shortage.
But more importantly, such income transfers pose fundamental questions of
fairness. Why should the uniquely public burden of providing subsidized housing
to the poor and middle class be borne solely by providers of rental housing?
Given both the inefficiency and unfairness of the rent control "tax,"
I think government should rely on broader, more equitable means of subsidizing
poor families.
by Xu Zhi Peng
by Xu Zhi Peng
No comments:
Post a Comment