Rent Control: Pros and Cons

Evaluate the pros and cons of rent control and rent stabilization in NYC.

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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.