Rent Control: Pros and Cons Evaluate the pros and cons of rent control and rent stabilization in NYC. Rent control is the government imposition of price ceilings on rent for apartments in certain areas of a city. The goal is usually to protect the rights of the poor.
Thus, in a rent controlled or rent stabilized building, the amount of rent will not increase as quickly as inflation. While the moral side of rent control may have some appeal, in the long run the disadvantages far outweigh the advantages. Those who argue in favor of rent control say that it is the only way to protect lower-income tenants from landlords who overprice, and from being forced to move out of a neighborhood because they cannot afford the rent. Limiting the price that a landlord can demand helps maintain a city's ethnic diversity and prevents the creation of slums on the outskirts of the main city. Another thing that proponents say is that by linking rent prices to apartment maintenance and material improvements, rent control actually improves the state of housing. Overall, they argue that the goals of rent control can be reached if they are administered in a careful and just way.
The opponents, though, have both theoretical and practical experience on their side. First, rent control creates a market that is unfair for everyone. Since the rent is set at a lower than normal level, an unsatisfied demand is created. This increase in demand leads to an increase in the cost of rents in the uncontrolled sector. Thus, two types of rents are created: those that are unfairly cheap, and those that are unfairly expensive. Another problem that is created is that landlords who own rent controlled apartments are often not able to earn enough money to adequately maintain buildings.
This leads to run-down, poor quality housing. In many cases, landlords lose so much money that they are not able to even pay the debt on the properties, and they abandon them. Both of these effects have been documented in New York and elsewhere, and go against the goals of rent control. Finally, rent control has the bad side effect of turning away new construction. This is because even if rent controls don't include new constructions, owners are afraid to build any new buildings if in a few years those too will be taken over by rent control. Rent control thus leads to less construction and an even greater unsatisfied demand.
This, in turn, increases the rents of uncontrolled apartments even more. New constructions are also avoided because banks and insurance companies don't want to invest in areas where rent control is in effect, because they know that it is likely that landlords will not be able to pay for the building, and they will lose their investment. For all of these reasons, I believe that rent control should be abandoned in New York City. The situation we have is of many run-down buildings that are rent controlled, and other areas where rent is so expensive that no one from the middle class can afford to live in them. On top of all this, in New York, many people rent out their rent controlled apartments for a profit aˆ” a practice which is opposite to the initial spirit of rent control legislation. Without rent control, the housing situation in New York would be more equitable for everyone, and the city would benefit.
Critically evaluate the issues in the people versus places controversy. The people versus places controversy is concerned with two basic philosophies of distributing benefits with the goal of improving living standards and local economic development. In basic terms, the "people" approach tends to emphasize assistance to individuals, giving them tax breaks, financial help, job training, and migration (to areas of better employment) assistance. The "places" approach focuses on improving the quality of a place, in the hope that the people who live there will benefit from the change.
In my opinion, both of the approaches have drawbacks, and a mixture of the two is the best way to solve the problems of local economic development. The people approach, based on making individuals more prosperous, is based on the rationale that only people matter. Those who support it argue that if you improve the lives of people, it doesn't matter where they live. Thus, they would argue for job training programs and not for strategies that would try to bring factories into a certain city. One of the main negative effects of the people centered approach is that it encourages migration.
This is a disadvantage in the big picture for three reasons. First, migration away from problem areas of the most qualified only worsens the situation of those areas. If a city spends money on training people to become more efficient and better skilled workers, and those people then move on to find better job opportunities, then that city hasn't succeeded in its primary goal: to improve the quality of life in its borders. In the end, the skill level of the local population doesn't improve, in fact, it may decrease. Another disadvantage of migration is the fact that it leads to the disintegration of families and communities.
When it becomes easy for people to move from one place to another, then the bonds which strengthen communities fall apart, and the nation as a whole loses a valuable asset. Finally, politicians, who rely on the support of their constituents to be elected, are not likely to support people centered approaches because of migration. There is no reason why they would want to spend tax money on training people when they cannot be sure that those same people won't leave the community and enrich another city with their new skills. Place centered approaches also have drawbacks. First, much of the benefits go to the non-poor. This is because the subsidies for industry or other incentives for growth and improvement are given to those who already have money.
These are the people with enough capital to make a difference in the quality of a place. While the place centered approach does not foster migration, and therefore it has the support of politicians, it still is not very popular. Another problem is the fact that place centered programs often do not help the areas that are in the most need of help. This is because the aid from these programs goes to the places with the most potential, not the most need. Finally, a problem with place strategies is that they do not let the market function freely, and therefore many economists would argue that efficiency on a national level is reduced. This would defeat the goal of the program in the big picture.
Overall, both the people and place approaches have advantages and disadvantages. In choosing which one is best, it is wise to look at the particular needs of each community, and develop a mixture of the two solutions. For example, in an area that is very poor, where it is unlikely that business will invest, even with subsidies, then a people approach may be the only way to improve the local economic situation. On the other hand, in an area that shows some promise, and which could improve with the arrival of more jobs, the place approach may be best suited.
In any case, it is impossible to say that one or the other is better in all instances; and it is essential to remember that neither of them can offer a perfect solution to the age-old problem of improving a community's economic health.
