More often than not, ill considered economic policies often backfire and have the opposite effect to that intended. Rent control is a textbook example of how the road to hell is paved with good intentions. And yes, it was used in my undergrad economics classes. Yet another reason why a good education is a must, not just for politicians, but for the people who vote them in.
Sir lastnail wrote on Nov 28
th, 2010 at 11:20am:
freediver wrote on Nov 27
th, 2010 at 2:03pm:
Quote:What this country needs - and, has needed for a long time - is some sort of rent controls like they have in the United States. Then, landlords would have to justify rent increases.
And, if that happened, I don't think things like "the real estate agent told me I should be getting more rent" would qualify as a valid reason for increasing the rent (like what happened 2 years ago when our rent was increased from $215 to $300 a week - after this particular agent made yet another unsuccessful attempt to get the owner to sell).
But, with the useless, spineless wonders we have running this country at the moment (plus the fact that many politicians are also landlords themselves), I won't be holding my breath waiting for it to happen...
Rent control is a really bad idea and is a text book example of how economic policy can backfire if you don't understand the economic implications.
No it's a good idea because it discourages property speculators and hoarders because they can't put up the rent when they feel like it !!
Here are a few reasons why it is a bad idea.
1) Black market payments. You can't stop market forces. If a property is worth a lot more than the actual price tag, whoever makes the decision on who gets it is up for a big payday, be it the agent or the landlord. People will pay an under the table lump sum to get into a rent controlled place. And guess what? The poor people who supposedly benefit are the least able to make this payment.
= bad news for the poor
2) Maintenance. If you are getting well below market value for your property, you have less incentive to maintain it.
= bad news for the poor
3) Rich people make better tennants.
If you are not doing the maintenance yourself, you are better off getting a wealthy tennant, as they are more likely to pay for the maintenance out of their own pocket, rather than wait around for you to do it. So, landlords actually discriminate against the poor in choosing tennants. If they are rich enough, you may end up with a property in better condition than when you started.
= bad news for the poor
4) It's not what you know, it's who you know. People are loathe to move out of a rent controlled apartment. When they do, they will have a dozen friends wanting to take it over, or even sublet. This means the most vulnerable people are even less likely to benefit.
= bad news for the poor
5) Less supply. If prices are forced down, there is less incentive to build new housing. Less supply means even higher prices.
= bad news for the poor
6) Beuracracy is expensive. The more you interfere and regulate to try to get around the inevitable, the more expensive it becomes to comply with the legislation. Landlords must either pass this cost on, or they simply stop building new properties. Les supply means higher prices
= bad news for the poor
7) Owning vs renting out.
If you have a choice between selling your house to a wealthy owner or renting it out to poor people for bugger all, you are more likely to sell to someone who will live there themselves - in other words, a rich person, not a poor person. Supply fdries up, prices rise and it is even harder to find a rental property.
= bad news for the poor
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rent control is a bad idea (Read 189 times)
