Question

3. Effects of rent control 

Rent controls force landlords to price apartments below the equilibrium price level. An immediate effect is a shortage (excess demand) of apartments, because the quantity of apartments demanded is greater than the quantity supplied at the regulated price. 

When cities prevent landlords from charging market rents, which of the following are common long-run outcomes? Check all that apply. 

• The quantity of available rental housing units fails. 

• Landlords earn lower profits from renting housing units, but the rent charged has no effect on either the quantity or quality of rental units. 

• Black markets develop. 

• Nonprice methods of rationing emerge. 

Answer 1

Answer: the quantity of rental housing unit falls.

: Black markets develop.

When there is excess demand for apartments due to rent control, fewer apartments will be rented and the existing ones will be invested in things that would give a higher return.

Also as there is rent control, the demand for apartments increases and supply decreases. This creates shortage for rental apartments. Many will be in search of apartments. Such shortage induces owners to engage in Black markets by charging a higher rate.