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Homework answers / question archive / If the cost of housing rent is regulated so that prices are kept artificially low, what will happen to the availability of apartments? What might be an unintended consequence of a rent control designed to help low income renters?

If the cost of housing rent is regulated so that prices are kept artificially low, what will happen to the availability of apartments? What might be an unintended consequence of a rent control designed to help low income renters?

Economics

If the cost of housing rent is regulated so that prices are kept artificially low, what will happen to the availability of apartments? What might be an unintended consequence of a rent control designed to help low income renters?

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In an economy with forced rent price controls, the availability of apartments become scarce. This is because there will be no incentive to build new housing facilities to meet demand when the old infrastructure becomes obsolete or with a growing population. When this becomes critical, the government may step in and allow easement on the price restriction for new buildings. Because of the high demand for new facilities, landlords, in theory, can charge much higher rent than normal and only target higher income tenants.

An unintended consequence of price control is reduction in profit from rental payments and landlords become reluctant in spending money for upgrades, thereby letting the quality of the living facilities to deteriorate to an unlivable status.