Click the image to read about price ceilings at The Dismal Scientists
The Bay Citizen reports on one of the effects of government-imposed price controls: shortages. The price-control system? Rent control. It’s been in effect in San Francisco for decades, and like every other place where it’s been implemented, it has the same result: perfectly good housing is taken out of circulation because owners of the properties are not willing to operate them at a loss.
“In San Francisco, one of the toughest places in the country to find a place to live, more than 31,000 housing units — one of every 12 — now sit vacant, according to recently released census data. That’s the highest vacancy rate in the region, and a 70 percent increase from a decade ago.”
The reason? The city’s pro-tenant, outdated rent control laws that make it difficult to raise rents or evict a tenant.
“Increasingly, small-time landlords are just giving up, like one who has left two large apartments on the second and third floors of her building vacant for more than a decade, after a series of tenant difficulties. It’s just not worth the bother, or the risk, of being legally tied to a tenant for decades.
“Vacancy rates are going up because owners have decided to take their units off the market,” said Ross Mirkarimi, a progressive member of the Board of Supervisors. He attributes that response to “peaking frustrations in dealing with the range of laws that protect tenants in San Francisco that make it difficult for small property owners to thrive.”
You’d think government officials in cities like San Francisco, and New York, -and every other place where it’s been tried with the same results- would get a clue, and let markets decide what the price of housing should be. There’d be a lot more happy landlords, and a lot more places to rent.
From the Concise Encyclopedia of Economics:
Rent control, like all other government-mandated price controls, is a law placing a maximum price, or a “rent ceiling,” on what landlords may charge tenants. If it is to have any effect, the rent level must be set at a rate below that which would otherwise have prevailed. (An enactment prohibiting apartment rents from exceeding, say, $100,000 per month would have no effect since no one would pay that amount in any case.) But if rents are established at less than their equilibrium levels, the quantity demanded will necessarily exceed the amount supplied, and rent control will lead to a shortage of dwelling spaces. In a competitive market and absent controls on prices, if the amount of a commodity or service demanded is larger than the amount supplied, prices rise to eliminate the shortage (by both bringing forth newsupply and by reducing the amount demanded). But controls prevent rents from attaining market-clearing levels and shortages result.
Read the rest of this informative lesson on rent control at the Concise Encyclopedia of Economics.
(via NewsAlert)
