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Saturday, October 03, 2015

Check out The High Cost of Rent Control

That rent control is an ineffective and often counterproductive housing policy is no longer open to serious question. The profound economic and social consequences of government intervention in the nation's housing markets have been documented in study after study, over the past twenty-five years. In response to this hard-earned experience, states and local jurisdictions from Massachusetts to California have banned or greatly constrained rent control. Nevertheless, a number of communities around the country continue to impose rent controls, usually with the stated goal of preserving affordable housing for low- and middle-income families. Rent control does not advance this important goal. To the contrary, in many communities rent control has actually reduced both the quality and quantity of available housing.

Role of Rents in a Market Economy 

Too often, those who advocate rent regulation have ignored the basic laws of economics that govern the housing markets -- treating privately-owned, operated and developed rental housing as if it was a "public utility." In so doing, they harm not only housing providers, but also, in the long-run, the consumers they intend to serve.

Rents serve two functions essential to the efficient operation of housing markets:

they compensate providers of existing housing units and developers of new units for the cost of providing shelter to consumers; and
they provide the economic incentives needed to attract new investment in rental housing, as well as to maintain existing housing stock. In this respect, housing is no different from other commodities, such as food and clothing -- the amount producers supply is directly related to the prevailing market price.

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