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Supply and Demand - Essay Example
Pages 2 (502 words)
Rent control was one of hundreds of commodities regulated by the government during World War II. New York State legislators defended the War Emergency Tenant Protection Act-also known as rent control-as a way of protecting tenants from war-related housing shortages…
Rent control, the worst planning by governments lacking courage and vision, has been spearheaded by upstate lawmakers such as Assemblyman
The consequences of price control on apartments are that entrepreneurs who see inadequate return on their investment are not motivated to invest in rental housing; landlords whose rent do not cover cost of operations stop maintain units or abandon them; despite rent controls, New York City renters pay the higher average rents in the country; demand for excessive space remains high because rents are artificially low; and rent control does not provide affordable housing for low to moderate income tenants.
Rent control, like all other government-mandated price controls, is a law placing a maximum price, or a "rent ceiling," on what landlords may charge tenants. To have any effect, the rent level must be set at a rate below that which would otherwise have prevailed. And if rents are established at less than their equilibrium levels, demand will necessarily exceed supply, and rent control will lead to a shortage of dwelling spaces. In the absence of controls on prices, the amount of a commodity or service demanded is larger than the amount supplied, prices rise to eliminate the shortage (by both bringing forth new supply and by reducing the amount demanded). But controls prevent rents from attaining market-clearing levels and shortages result.
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