With the mounting concern about homelessness and affordable housing, the implementation of public policies to help thwart these issues are on the forefront. From an economist perspective, the analysis of those aforementioned issues should be done in a scientific means.
A question must be asked: If homelessness is an issue, along with affordable housing, how does one address this problem? What type of policies should be implemented by public servants in order to help resolve this issue? A very popular method is the implementation of rent controls.
Rent controls policies may contain all sorts of regulations and items that are required by land lords to ensure affordable housing, which should curb the homeless problem. Let’s do a brief review of an economic analysis of how this works.
Rent control regulations force a form of price control(fixing) onto the real estate marketplace. Landlords have a ceiling in which they can charge for rents, regardless of the underlying costs to bring those rental units to market. If the price to rent is pushed over the rent control price limit, the land lord must charge below that rental control price limit. An excerpt from the study listed below:
“Rent Control in San Francisco began in 1979, when acting Mayor Dianne Feinstein signed SanFrancisco’s first rent-control law. Pressure to pass rent control measures was mounting due to high inflation rates nationwide, strong housing demand in San Francisco, and recently passed.. This law capped annual nominal rent increases to 7% and covered all rental units or less.”
Since the costs, to bring the rental unit to market, must be recouped by the landlord, and the price controls discourage landlords charging a price over the rent control limit, this creates to incentive for land lords to not rent out the buildings, or seek out other means to avoid the rent control regulations. This leaves a glut of rental units, and more individuals seeking for units to live. It has the inverse impact than the original intention of the rental control law.
This topic will be explored in greater detail with another write up, but this leads into the featured research paper discussing rental controls, and using empirical evidence to support the claim.
Read more here: https://www.nber.org/papers/w24181.pdf