BUS305, Competitive Analysis and Business Cycles Mod 2 Case Assignment - Essay Example

The proponents of rent control cite inflation and lack of affordability of housing units, arguing that shelter is a basic need that government policy should address. High rents would discourage industries because relocation of workers would be costly, and the arbitrary or unreasonable raising of rents of landlords, exercising their market power, can force workers to move out of areas of employment, with attendant high costs to them. Therefore some kind of control is necessary. The proponents also argue that present conditions are not really that bad for the landlords because of "vacancy decontrol" allowed, when they can raise the rent to about market clearing level once a tenant moves out.

Also in some areas, new construction is exempt from rent control, no doubt a compromise solution to the possible incidence of urban decay caused by lack of maintenance of rental properties subject to rent control. There are also tax deductions that landlords are allowed to make on the properties - such as those that pertain to depreciation and real estate taxes. In some jurisdictions, landlords are allowed to raise rents at a certain ratio in relation to the increase in the Consumer Price Index, say, 60 per cent.

It is not as bad for landlords as it is often portrayed. Those who are against rent control are numerous and preponderant. Many studies have confirmed that rent control benefits tenants and harms landlords (Nicholson, 1997). Even in the 1950s, waiting times for new apartments in Sweden were said to have reached 3 years because of the shortage. Secondly, rent controls affect housing quality: Landlords can refuse to do maintenance and repair work on the pertinent unit thus reducing their quality and the supply of units.

If tenants insist that maintenance work be done, landlords can always tell them to leave if they are unhappy. The deterioration of housing units subject to rent control is such that Vietnamese Foreign Minister