What are the effects of rent control, both good and bad?
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Rent control is a form of price ceiling.
Normally in a free competitive market the price of a good will be determined at the market equilibrium (the point at which the quantity of the good supplied is equal to the quantity of demand for it)
This ensures that everyone who want to pay the price for that good will receive it.
When you artificially lower the price by introducing a price ceiling then the quantity demanded will exceed the actual supply because people will buy more of a thing if it is cheaper. This creates a housing shortage, meaning that not everyone who wants a house will be able to get one. even if you are willing to pay extra for it you cant legally because of the price ceiling.
This is bad for both parties because the renter doesn’t get to rent the thing they want and the seller doesn’t get to rent it out at the price they want. This is called dead weight loss.
A better way of dealing with high rent prices might be to develop public housing, or give out rent subsidies.
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