What are the effects of rent control, both good and bad?
In: 257
One thing that a lot of people miss is the effect on residents.
You basically cap their rent. Many people choose to stay at low income job and don’t upskill to increase the value of their labor as a result. I lived in a rent controlled area in Los Angeles and this was super common.
The effect on residents was that when big changes happened in the economy like recessions or they lose their job, they fell off a cliff because they couldn’t adapt to the new economic environment.
Those residents also tended to work at low skill simple jobs for a long time because they could afford to do so. Mainly high capital intensive low margin companies. Without cheap labor, these companies couldn’t survive. It prevented other more competitive businesses from thriving so the entire region misses out on new companies coming in that could possible pay more. It was one factor that prevented creative destruction in the economy.
It also created a large mass of workers who could be underpaid making wages low.
Latest Answers