Analyzing rent control in the short and long run

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Analyzing rent control in the short
and long run
Patrushev Vasilii, Ivanova Anastasia
SoSe 24 , 21.04.2024

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Structure
Important de nitions
Price ceiling
Short run effects
Long run effects
Big Apple case
Conclusions
Discussion
Sources
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Some important de nitions
Rent regulation - a system of laws, administered by a court or a public authority, which aims to ensure
the affordability of housing and tenancies on the rental market for dwellings.
A price oor is a government or group-imposed price control or limit on how low a price can be
charged for a product,good, commodity, or service.
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Price ceiling
Price ceiling above market price => non-binding price
ceiling => ineffective, because it does not change the
market outcome.
Price ceiling below market price => binding price ceiling
for the market because it changes market prices =>
changes traded quantity at the market.
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Small shortage of housing units in a short-run
Landlords can not adopt fast to new regulations
More possibilities for low-income families to nd
living place
Short run effects
Urban in ow
Increased freedom for young people
Better living conditions
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Long run effects
Huge shortage of living properties
Low rate of construction of new housing
Landlords are losing interest in improving their
homes
Long waiting lists
Discrimination
Social fragmentation and reduced population
movement
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Big Apple case
One-third of New Yorkers live in rent-controlled ats.
There is a social injustice when two identical ats can
differ signi cantly in price. Many tenants don't want to
move out because they can't nd housing of the same
quality for the same price. And forced eviction for
some reason becomes almost impossible. There is
also a complicated bureaucratic system. Economists
believe that a return to a free market would be the
right decision and not as painful as previously thought.
Also, a return to the free market will cause a
construction boom.
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Conclusion
The idea of rent control brings some favourable
results in the short term, but does not cause a
signi cant improvement in the situation. While in the
long term, the consequences of this policy can be very
unfavourable. The free market better regulates all
processes and interference will only upset the
balance.
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Discussion
What are your thoughts on rent control?
Do you see any additional advantages of
this policy or do you think it is better not to
interfere with the free market?
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Sources
Lecture (Topic 3, Markets and Welfare)
Analyzing rent control in the short and long run
(Mankiw and Taylor,2010,pp.111-115)
Rent Control: Academic Analysis and Public
Sentiment (Franz Hubert Humboldt Universitat zu
Berlin and State University Higher School of
Economics Moscow, 2003,pp 9-11)
The Long-Term Impacts of Rent Control (Matthew
Gross,2020,pp 30-31)
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