In cities with rent control, why doesn’t it work overall to actually lower the price of housing?
In: Economics
Price controls on any item never really work. If someone said that your 20,000 dollar car could only be sold for 1,000 would you sell it? Of course not. So price controls pull items off the market that would normally be sold for more than the price control max cap.
Does it help out a few people? Sure, people hunker down and never move, because they’ve got a sweet deal. So when they finally DO move and the landlord has that price cap removed, what does he do? He jacks the price way up, because he’s been theoretically losing money with the last tenant, compared to what he *could* have been making on the open market. So you end up with a bunch of disgruntled landlords who are jacking the prices up to rebel against the artificial ceiling imposed by rent control.
If you really want to see the endgame of oppressive price controls, look at Venezuela, their economy is in meltdown because it costs more to manufacture most foods and medicines than they can sell them for, so most manufacturers have stopped making anything. Supermarket shelves are empty because there is nothing they can sell and turn a profit.
Rent or food, it doesn’t matter, price controls never work.
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