What are the effects of rent control, both good and bad?
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Rent control is fantastic for ‘legacy renters.’ If you live in a rental unit rent control can freeze the cost of the unit or make life affordable. Rents for the longest time were cheapest in India because rents were permanently frozen in many units at 1905 levels. For the people in these units it was great! They were paying pennies for housing. In a lot of cases people would die and their children would take over the lease so you had inter-generational housing. And this is the case in most rent controlled housing. Having the lease becomes an asset to itself for the person who gets the lease. No one gives up those spots.
The downside is the supply crunch. If you set controls on rent prices it will eventually make developing new rental properties unaffordable. The market will shift more to home ownership and the people who will get homes are those who can afford them. Which is what ended up happening in India.
India ended up happening to India. They first tried to encourage rentals in 1999 by setting a different standard of rental properties made after 1999 compared to ones before 1999. So you still had those historic low price properties (that are literally vanishing after every single earthquake). But now you get about 6 million new homes per year.
The Indian parliament put in place more measures to encourage even more new housing by further restricting rent controls again. This is because a lot of the new homes that were being built were laying vacant because they couldn’t charge enough rent to cover the cost of these homes.
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