On Resolving the Dilemma of Rent Control

Abstract

This research examines the motivations for adopting rent control and discusses a policy alternative designed to respond to the political appeal of rent control while minimising the investment distortion, capricious redistribution and administrative complexity of most controls . The policy involves limiting regulation to those rents paid by households in the tenant population that are deemed unable to afford adequate housing. All rental units in a jurisdiction register their rents with the relevant authority and are assigned a controlled rent . Landlords must charge the controlled rent only for eligible households but receive the difference between that rent and the market rent from the government. The analysis considers the design of such a policy, its behavioural incentives and some administrative implications . There is also consideration of the appeal of this policy relative to both conventional controls and policies more popular in the literature, such as a housing allowance .

Rent Control: Its Rationale and Effects

“…An Ontario Economic Council study (Arnott, 1981) recommended a gradual phasing-out of rent control to no avail, while a Royal Commission's fouryear study was similarly ignored . Among others, the works contributing to this understanding include Olsen (1969) ; Olsen (1972); Cheung (1975) ; Frankena (1975) ; Arnott (1981) ; Marks (1984aMarks ( , 1984b ; Fallis and Smith (1984) ; Gyourko and Linneman (1990) ; Albon and Stafford (1990) ; Miron (1990) ; Marks (1991) . 2 .…”

“…An alternative explanation to this 'unstable market hypothesis', offered by Marks (1991), is based on political economy considerations . Sitting tenants, according to Marks, have a great deal of political influence because, unlike landlords whose votes are believed to go to business-oriented candidates anyway, they are likely to be `marginal voters' whose votes depend crucially on candidates' support for rent control .…”

“…Given that there is little evidence that rent control yields net benefits to households in greatest need for housing assistance (Marks, 1991), rent decontrol combined with an explicit tax on rental incomes earmarked for public housing purposes may be superior to rent control, 4 which certainly is haphazard in its distributional effects (Albon, 1978) . The government, or general taxpayers, certainly comprise an important party as well .…”

“…As Marks (1991) pointed out, it is "widespread throughout the world in both market and non-market economies" (p . As Marks (1991) pointed out, it is "widespread throughout the world in both market and non-market economies" (p .…”

Moderate Rent Control: Sixty Cities Over 20 Years

“…Most studies on rent control utilize economic models based on computer simulations of case studies. Literature that utilizes economic modeling has concluded that rent control lowers rents (Hubert, 1993;Lewis & Muller, 1992;Albon & Stafford, 1990;Marks, 1991). Other studies that have used economic modeling have found reductions in maintenance (Ho, 1992) and increases in the rent of undesirable tenants (Miron, 1990) under rent control ordinances.…”