Chapter 10, Problem 6DQ

To determine

Concept introduction:

Rent control:

Rent control refers to a system in which the government interferes in the rent payed by tenants to landlords. The purpose is to ensure that a fair amount of money is charged from the tenants by the landlords. Rent control ensures that well-maintained homes are rented at a low price.

Advantages of rent control:

• It helps in the allocation of housing existing in the market to renters at low rents below the equilibrium rent of the free market.

• It helps in the promotion of efficient maintenance of houses and the availability of houses at appropriate locations.

• It also helps in the prevention of wastage of resources by rationing the usage of housing by the people in need.

Disadvantages of rent control:

• Rent control is one of the main reasons of homelessness, as it discourages the construction of new houses in an economy.

• It causes reduction in the supply of rental units as at low cost the landowners have no incentive to rent their house. This is because they are not able to meet maintenance and different utility expenses.

• Due to rent control, large families often live in a small apartment and small families live in a large apartment because mobility from one to another apartment incurs huge expenses.

The way in which the percentage of voters who are renters affect the incentive of politicians to propose rent control and the reason due to which renters are less likely to vote in the local election.