Question

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. A) The quantity of available rental housing units falls. B) The future supply of rental housing units increases. C) Nonprice methods of rationing emerge. D) The quality of rental housing units falls.

Answer 1

When there exists rent control , there is shortage of apartments. This would have the following long run implications. In long run, the quantity of apartments would reduce. the reason being that the suppliers would find it less profitable to build more units for rent because of the rent controls. This would mean that the quantity would fall in future.

The quantity present would also reduce because in the immediate effect the suppliers might convert the existing ones as apartments to be bought and sold rather than to be rented. The lesser rent would eventually force some landlords to exit the market.

Non price methods of rationing would emerge because since they are charging a price or rent which cannot increase based on the quality of apartment, the suppliers would want to reduce the expense of maintaining the apartment. This would mean less of renovation and maintenance, poor upkeep etc. All this would affect the quality of the units as well. So the nonprice methods would emerge leading to a reduction in the quality of rental housing. All in future also , the landlords would use cheap materials and raw inputs to develop the renting units knowing that the rent received would be less.

Hence option A), C) and D) are correct.

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