Rent Control

Rent control artificially caps the amount which a landlord may charge a tenant for rent.When the price of something is capped below the market equilibrium price, a shortage occurs.The natural way for a market to deal with a lack of a product, in this case housing, is to either raise the price or produce more of the product.The rent control law, which created the shortage, prohibits the prices from going up.Because landlords know that they will be unable to receive market rents for new units, they do not build additional housing.This exacerbates the shortage further as new demand builds up yet the supply remains constant.

Often times, the landlord and renter will not be traders working with each other voluntarily out of mutual gains, but adversaries who seek to gain at the other’s expense.When landlords have a wealth of potential clients, and are not allowed to discriminate in monetary ways, they discriminate in non monetary ways.These ways on discrimination may include race, age, or gender.These issues create tension between two groups, landlords and tenants.