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Why Rent Control is a bad Idea   Term Paper ID:27925 Click to get this paper

Essay Subject: Examines the pros & cons of rent control. Concludes that rent control is a poor idea because of the destructiveness it brings to the overall housing situation.... More...

9 Pages / 2025 Words 5 sources, 16 Citations, TURABIAN Format $36.00 Return to List of Papers

Paper Abstract: Examines the pros & cons of rent control. Concludes that rent control is a poor idea because of the destructiveness it brings to the overall housing situation. Paper Introduction: Rent control is raised as an issue in city after city either because the city does not have rent control and some tenants' and liberal groups believe it should be instituted, or because the city does have rent control and critics want it abolished because of the damage they see it has done to housing, repair and construction, and even social relationships. Rent control is an idea with great appeal for the beleaguered tenant who feels that rents are too high and that there has been no government effort to correct the problem. Advocates see it as a way of imposing fairness, but in truth it imposes unfairness and disparity between people who have rented for a long time and new renters. It reduces the incentives landlords have to repair their buildings and to make improvements. It takes the profit out of being a landlord, and it effectively eliminates competition in housing in Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. Many of them are extensions of the problems it is supposedto prevent. Well, the rent- controllers will say, it was due process of law when the city councils of New York, Berkeley, and West Hollywood voted to limit the rent you could charge for a particular apartment. BibliographyAult, R. (Ault, 1981, p. 61-62)Such discrimination is also likely to occur concerning the eviction oftenants. Tuckerfinds further that this system is besieged by corruption: "As in anydecaying empire, wit, ambition, and talent are replaced by nepotism,politics, and corruption" (p. Rent control fails to deliver the benefits it promises and createsnew problems. 197)Of course, this is precisely the problem as rent control has tended tobecome permanent rather than temporary, a measure that politicians fearattacking because of its popularity with tenants. (1981). Ault (1981) details the presumed benefits of rent control and thedisadvantages he perceives in the system. It reduces the incentives landlords haveto repair their buildings and to make improvements. This decreased mobility mayalso lead to increased unemployment, since most labor markets arecharacterized by rapidly changing job locations. This might beovercome if new units are exempted, but still the problem is only lessened,not eliminated, because investors may see the extension of the rules fromold units to new as a possibility. If the landlord can expectfuture rent increases because of decontrolling vacant units or the completeending of control, maintenance is more likely to occur. F. Many cities adopted their rent controlordinances as more general price controls were phased out. Shenotes first that rent control is instituted because of the existence of ahousing emergency for which this measure is a temporary stopgap measure: As long as the assumption of an emergency is paramount, rent control legislation will be an ad hoc approach unrelated to other housing policies and programs; it will not evolve into a comprehensive program focusing on the essence of the rent control dilemma--the widening gap between tenants' ability to pay and the increased rentals required to operate and maintain housing. W. (p. Lett sees rent control asa clearly constitutional means of effecting changes in housing. Rent control: Concepts, realities, and mechanisms. In the rent control environment, landlords have an evengreater incentive to be very selective about tenants because they cannotevict so easily. It is a bad way to achieve a beneficial and equitable rentalmarket and exacerbates inequities. (1987) has written: "It is hard to think ofany economic nostrum more comprehensively discredited than rent control,though wage and price controls are a close second" (p. Practices also differ widely in the way newly constructedand vacated units are treated. As a result,everybody else ends up facing a vacancy rate of two percent with prices up2 to 1 percent above what they would be without rent controls. The New Republic, p. In truth, though, individual tenants often have incomeshigher than those of their landlords, and in any case there is no evidencethat indicates that average tenants have significantly lower incomes: To avoid subsidizing wealthy tenants, legislation is often written so as to preclude those units whose monthly rent exceeds some arbitrary level; but this is not a certain method of solving the problem. (1988, April 11). It takes the profit outof being a landlord, and it effectively eliminates competition in housingin urban regions. Sixth, rent control is anunsatisfactory means of redistributing income (Ault, 1981, pp. This isalmost identical to that of Chicago at about $35 , but the similarity endsthere. 58). . 7-8). But surely to limit the profit that can be made in one form of enterprise is to exercise a kind of discriminatory approach toward profit which the rule of law forbids . Third, rent control erodes thetax base and shifts a tax burden to homeowners. Rent control may cause afurther erosion in the tax base as it discourages new construction.Fourth, rent control reduces mobility, since people are less likely to moveout of a building that is rent controlled. For the poorest 2 percent of households, rent now takes up an average of about 4 percent oftotal income, and this is a third more than the government considersreasonable. Advocates see it as a way of imposing fairness, butin truth it imposes unfairness and disparity between people who have rentedfor a long time and new renters. . And, of course, the ultimate act of disdain: the abandonment of buildings. In New York, rent control has stifled newconstruction. The claim is also made that rent control benefits racialminorities, to the degree that racial groups differ systematically in theirincomes. The dilapidation of buildings landlords can't afford to invest money in modernizing. The New Republic, pp. (Ault, 1981, pp. 71)Buckley suggests pleading to the courts that rent control is simplyunconstitutional, and he offers reasons for this belief: The Fourteenth Amendment provides that life, liberty, and property cannot be taken from us save by due process of law. No one can flee a drug-infested neighborhood--or even break off with a boyfriend--without facing the terrors of finding another place to live. Second, it is stated that rent controlcauses maintenance of rental housing to be reduced, for much the samereason since there is less incentive for maintenance and less possibilityof increased rents to pay for the maintenance. William F. Just because a tenant is willing to pay a higher rent for his existing unit than he is currently paying does not imply that he will do so if he can obtain a similar unit from another landlord at a lower price. Then there's rent control. This is more trueif the building is located in a high-rent area, since high profits are morelikely to be made from such a building (Ault, 1981, p. Rent control: Myths and realities. Ault also notes that there are differentforms of what is called rent control. He notes that the number ofAmerican cities adopting rent control has been increasing, so presumablythe supposed advantages have attracted these municipalities to this way ofregulating the rental market. (1986). Vancouver, B.C.: The Fraser Institute.Buckley, W. Since that day, finding a place to five has gradually become the predominating obsession of the average New Yorker. Other things being equal, a landlord is likely to rent to tenants he personally likes; and to the extent that he has any racial prejudices, he will be inclined to select tenants in a racially discriminatory manner. The decayof an individual building affects those nearby to create a vicious cycle sothat entire blocks and neighborhoods have been ruined by rent control.Ault states that not all rent controlled housing turns into slums and thatdeterioration depends on a large number of factors which affect theprofitability of maintenance expenditure. Doubts can beraised about the effectiveness of price controls to curb inflation, just asone can about rent control: Stopping or slowing the rate of price increases for one commodity will lower the overall rate of inflation only if it does not result in more rapid increases in the price of other commodities. 71). Ault says this is both irrelevant andincorrect: Even if tenants were to respond to increases by continuing to demand the same amount of housing, individual landlords could not raise rents with impunity. 22) Rent control in New York, says Tucker, has created a privileged classof tenants constituting about 3 percent of the tenant population who liveforever at below-market rates. The presumed advantages and real disadvantages of rent control. She notesthat the initial application of rent controls was brought about by wartimeemergency housing shortages engendered in turn by decreases in housingconstruction because resources (materials and labor) were shifted todefense production. New tenants are easily obtained under rent control, and alandlord will not hesitate to evict for trivial reasons, including racialconsiderations. The result was thatthere was an excess demand on the supply of housing units, lading tofrequent exploitation through exorbitant and speculative rent increases.After the war, conditions returned to normal in most communities, and aresurgence in new construction and a decline in the movement of the migrantpopulation contributed to normalizing housing conditions and to stabilizingrents (Lett, p. A more flexible rentcontrol program which links rent increases to expenditures on repairs maylead to a less rapid rate of depreciation. 57)As a rule, under rent control neither the tenant nor the landlord hassufficient financial interest in the property to maintain and upgrade aparticular building, instead it usually slides into disrepair. The problems were increased by large and rapid shiftsof population to areas of wartime defense production. Tucker (1988) states the issue clearly with reference to New YorkCity when he writes: New York's legendary "housing shortage" began the day in 1947 when the huge tenant majority convinced the politicians (and eventually the courts) to extend wartime price controls into permanent housing regulation. A number ofreasons have been offered for why affordable housing has become scarce. National Review, 71.Lett, Monica R. It helps a few tenants, the majority of whom are not poor,at the expense of many more poor tenants who must contend with crumblingbuildings and condo conversions ("Shelter Skelter," 1987, pp. Rent control is raised as an issue in city after city either becausethe city does not have rent control and some tenants' and liberal groupsbelieve it should be instituted, or because the city does have rent controland critics want it abolished because of the damage they see it has done tohousing, repair and construction, and even social relationships. Rent control--unconstitutional? In W. 59-6 )However, the view that high rents cause inflation is incorrect in that itconfuses high prices with rising prices. (p. . You just say the hell with it, and walk away; and what once were, and still could be, rental apartments become something on the order of the South Bronx, which looks like Dresden, the day after the bombing. (Ault, 191, p. Buckley notesthat there are numerous distortions brought about by rent control,distortions in the marketplace and in the law. In its purest form, he notes, rentcontrol is an across-the-board freeze on the price of all rental housingunits at some predetermined level, generally at a level that prevailed atsome date prior to the adoption of the ordinance. An examination of the issue as it has developed over the pastseveral decades will show why rent control is a bad idea and why it has noteven accomplished its stated goals, let alone avoided creating newproblems. However, considering allthe factors involved, it is not clear how rent control will affect variousincome groups. . (p. Rent control reduces earnings and soreduces the market value as well as the tax base. 63) In addition to refuting the advantages promoted by many, Ault notes anumber of real disadvantages to rent control, noting that the validity ofeach disadvantage depends on the type of rent control program involves.First, rent control discourages the construction of rental housing, sincerent control decreases the profitability of rental housing. (1976). In truth, though, rent control promotes racial discrimination: The main effect of rent control is to reduce rental prices below market clearing levels where the number of units of each type that tenants are willing to lease is just matched by the number of units that landlords are willing to offer for rent. The premise of Tama Janowitz's best-selling Slaves of New York--in case you didn't realize it--is that everyone in New York is the slave of their own apartment. Tucker notes one day when the Chicago Sun Times advertised 1,3 apartments, mostly in the pricey Loop and North Side areas, with an averagerent of $59 , and with 15 percent below the median. 7-8.Tucker, W. 71).Buckley expands on this idea and states that rent control is actually nomore than a capital levy on those whose savings went into the constructionof apartment buildings instead of some other type of construction. Rentcontrol is an idea with great appeal for the beleaguered tenant who feelsthat rents are too high and that there has been no government effort tocorrect the problem. In many cases, it has also created a black market insublets, with those paying little for rent because they have rent-controlled apartments and renting them for higher prices to othersillegally. 22). The current set of rent controls are called "secondgeneration" because they came about as a result of peacetime conditions. Another claim is that rent control is necessary to stabilize theeconomic characteristics of a city's population. Cities use a variety ofdefinitions of real estate tax base, but assessments are generally linkedto the market value of the property. The couple with four bedrooms, the children all grown up: who won't give up the large, unused space--because they can't find a one- or two-bedroom apartment at the same price level. New Brunswick, New Jersey: Center for Urban Policy Research.Shelter skelter. On the same day theNew York Times advertised 2,6 apartments in all five boroughs at anaverage price of $1,3 and with only one apartment below the median of$36 . Another claim is that rent control is necessary to prevent rentgouging, which is more likely to occur in rental housing because of thespecial nature of that market--housing is a necessity, and it is impossiblefor tenants to protect themselves from rent increases by reducing theamount of space they choose to rent. Another claim is that rent control is necessary to stop inflation,and historically the introduction of rent control has coincided withperiods of rapid inflation. Olsen. (1987, May 11). This would only be true if the tenants alwayshad lower incomes than their landlords so that the immediate effect of rentcontrol would be to transfer wealth from the "rich" landlords to theirpoorer tenants. The reason for this is rent control. But to the extent that rent control holds down the price of housing, tenants have a larger portion of their income left over to spend on other things; and in spending this income on other goods, they will drive up their prices. 22.----------------------- 11 . Many employers in booming suburbs find that low-wage workerswho staff the new corporate villages cannot afford to live in the samecommunity and may have to live a two-hour bus ride away. The justification for rent control is offered by Lett (1976). Fifth, rent controlincreases the cost of providing rental housing. Tucker points out how surprised peopleare to learn that the median rent in New York City is only $365. Buckley Jr. (Ault, 1981, pp. The passion for condominiums, to avoid the constrictions of rent control. In New York, on the other hand, the prices of 3 percent to 4 percent of all apartments are held below market by rent controls, andtenants would not think of leaving these apartments. This lack of affordable housing is a major factor in the growthof homelessness, one of the major social burdens faced today. Ault says that the arguments in favor of rent control are startedwith the statement that there is a housing shortage. Tucker says Chicago has anormal housing market, with a vacancy rate of six percent, and where peoplecome and go as they please, getting what they pay for and paying for whatthey get. Inflation is largely theconsequence of government policy concerning taxation, expenditure, andmonetary affairs and not rent. He cites a number of thesein a laundry list of people skirting the letter of the law in a rentcontrol situation such as that in New York: The lady who will maintain an apartment she does not need, because she is afraid to let go the bargain she has got. (p. Rental housing is a major problem across the country and is becomingharder to afford for growing numbers of Americans. The first argument for rent control isthat it protects the poor. butone of the reasons cited is rent control, one of the mechanisms protectingcurrent homeowners and tenants. This places aburden on the workers and adds to the inefficiencies faced by theiremployers. Some jurisdictions exempt these units fromsubsequent control while others do not. 198). Block & E. Many cities requirethe existence of a housing shortage, generally defining it as a vacancyrate below some fixed percentage, as a prerequisite for the implementationand continuation of rent control. And doesn't the Fourteenth Amendment attempt to reflect the rule of law? Everyone else who comes to the city or wholeaves one family to find a new place to live, moves from a burned-outbuilding, or otherwise has been placed unwillingly on the housing marketmust scramble for the rented condominiums and illegal sublets now making upthe available housing market for New York City Prices for these apartmentsare well above real market value. In most cases, though,some upward adjustments of rent are permitted as operating costs increase,as improvements are made, or as some undue hardship to the landlord can bedemonstrated. 65-72). If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.