Since the moment we are born we start facing all these different kinds of laws, taxations, and regulations. Depending on the geographic area in which we live in those laws increase or decrease. Rent control is one of those laws every single person encounters at least once in their lifetime. Those who believe they never will engage in rent control are most likely wrong. The reason is that rent control is the amount of money established by the government that a landlord can charge for rent/mortgage. Rent control has a huge history which can be traced to hundreds of years ago. The purpose of this essay is to explain how rent control started, the benefits and drawbacks. Provide the readers an example of rent control and allowed them to understand that it is difficult to determine whether or not rent control is helpful. It all depends on which side of the grass you are standing on.
The documented history of rent control began in Rome in the years 1470-1900. Although there is not a lot of documentation the church has to prove that during that time the Pope was who regulated rent control. The reason that the Pope establish this regulation was to protect the Jews from being overcharged by their Christian landlords. Eventually, the rent control grew into several different countries, but it took quite a long time to reach the United States. Rent control was adopted by the United States during WW1. Although, there weren’t any laws established local governments created committees which forced landlords to maintain a certain rent limit. Years later the improved rent control became active due to the shortages of WW2. During this time rent control grew in cities such as New York, Los Angeles, Washington, DC., and San Francisco were large populations lived.
In example, New York has the longest rent control program in the United States. The qualification to be in the rent control program is the following: a tenant must have been living in the apartment since July 1, 1971, or has demonstrated to be more qualify then the previous tenant. Depending on which type of apartment the tenant is trying to rent the qualification increase. Rent control was effective for a few years because it allowed tenants to live at a lower wage. However, rent control was eliminated by referendum in November 1994, eventually the protection for elders, and low income families also expired. Many believe that rent control is higher now than it was in 1994. This year landlords saw a 15 percent decline in the tenants that rerented their apartment complex and a 25 percent decline in the units (Smaller apartments).
Through time rent control has always had controversy over why is beneficial or not. Economist believes the rent control is not good for the economy. One reason why is not good for the economy is that it unstable the number of people who can afford to rent. For example when there is rent control young people obtain large apartments at a very low cost. It will be fine for a while because they’re just starting to live and create families. Eventually, their children grow up and leave their homes. Those families do not move to a smaller apartment although they no longer need the space. New young people who are starting families have a much harder time finding a home because the previous families never left. When they do find an appropriate home it is extremely expensive more than they can afford. This problem grows bigger when landlords are left out of business because their larger units are not being occupied due to their market price.
The second problem with rent control is that landlords are being left out of business causing them to stop providing appropriate maintenance to the apartments. Even when there are a few people who can afford to pay the high prices of apartments landlords a not willing to lose more in maintenance. Those apartments eventually lose value and even fewer people are willing to rent them. Another important factor is the landlords are not building more apartment complex. This affects the economy in two ways the first one is that more people are being left without of home. They eventually will end up in the streets with no jobs, becoming a burden for the economy. The second way is the fewer people are obtaining jobs that are created by the apartments. Some of those jobs are constructors, gardeners, secretaries, managers, electrical company, etc. If fewer people are being higher it destabilizes the economy having the government pay more for unemployment. This eventually adds on to the huge debt of the United States.
Many people believe that the beneficiaries of rent control are those in the lower class. This statement is not true because rent control is more of a political tool for those who know how to utilize. People in the middle and upper class are the ones who mainly benefit from rent control. They’re people who are well connected with the wealthier and are able to go in front of everyone else and obtain the larger apartment at a lower cost than the actual market value. An example is the former mayor of New York City Edward Irving Koch. While he was mayor he was living in an apartment with rent control for only 450 dollars a month. The real market price of the apartment is estimated to at least three times more than what he was paying. Mayor Koch is an example of upper class people who take advantage of their positions to pay less even when they can afford the real market prices.
Fig.1 Presto R. “Introduction to Economic Analysis, v. 1.0.” 5.5 The Politics of Price Control, FlatWorld, catalog.flatworldknowledge.com/bookhub/13?e=mcafee-ch05_s05.
Above is a diagram which presents a theoretical analysis of the long run effects of rent control. Over time the demands for apartments will increase as well as the population and incomes of the city. Eventually, all those factors will cause the tax property to rise, wages and the supply will shorten. In the short run this problem has little effects but in the long run is very destructive. In the long run, many apartments will be removed from the market and the quantity will fall as the demand for them rises. One can see the changes in Fig.1. The gray lines represent the old values of demand, the short run supply, and the long run supply. The black lines show the new values of the market, reflect an increase in demand, a fall in the long run supply and the decrease of available apartments to rent under rent control. This type of example is seen in cities such as New York and Los Angeles were the legal rent does not cover the actual market value of the apartment and landlords are not able to afford the maintenance. It is hard to determine whether rent control is helpful for the economy because it benefits a portion of the low-income class as well as the middle and upper classes. It all depends on which level of the economic pyramid you are standing in. Rent control is an issue the many people face worldwide level but does not seem to be completely ending. Even when rent control may seem unfair for some it allows a few to live modestly and not become a burden for the country.