Rent control leads to housing shortages from "summary" of Free to Choose by Milton Friedman
Rent control is a well-intentioned policy aimed at helping low-income individuals afford housing. However, the unintended consequences of rent control can be detrimental to the housing market. When the government places a cap on how much landlords can charge for rent, it creates a disincentive for landlords to maintain or improve their properties. As a result, the quality of rental units may decline over time, leading to a shortage of desirable housing options for tenants. Furthermore, rent control can lead to a misallocation of housing resources. Since landlords are unable to increase rent prices to reflect market demand, they may choose to convert their rental units into alternative uses or simply exit the rental market altogether. This reduction in the supply of rental housing can exacerbate the shortage of available units, particularly in high-demand urban areas. In addition, rent control can deter new construction and investment in the housing market. Developers may be hesitant to build new rental properties if they are unable to recoup their costs through higher rental prices in the future. This can further constrain the supply of housing, particularly in areas where demand is high but construction costs are also high. Moreover, rent control can create inefficiencies in the housing market by distorting price signals. When rents are artificially kept below market rates, it can lead to excess demand for rental units, as more people are willing to rent at the capped price than there are units available. This can result in long waiting lists for rental housing and even black markets for rental units, further exacerbating the housing shortage.- While rent control may appear to provide short-term relief for low-income tenants struggling to afford housing, its long-term effects can be detrimental to the overall housing market. By distorting incentives for landlords, misallocating housing resources, deterring new construction, and creating market inefficiencies, rent control ultimately leads to housing shortages that harm both tenants and landlords in the long run.
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