Essay/Term paper: Rent control: pros and cons

Essay, term paper, research paper:  Marketing

Rent Control: Pros and Cons

Evaluate the pros and cons of rent control and rent stabilization in NYC.

Rent control is the government imposition of price ceilings on rent for
apartments in certain areas of a city. The goal is usually to protect the rights
of the poor. Thus, in a rent controlled or rent stabilized building, the amount
of rent will not increase as quickly as inflation. While the moral side of rent
control may have some appeal, in the long run the disadvantages far outweigh the
advantages.

Those who argue in favor of rent control say that it is the only way to protect
lower-income tenants from landlords who overprice, and from being forced to move
out of a neighborhood because they cannot afford the rent. Limiting the price
that a landlord can demand helps maintain a city's ethnic diversity and prevents
the creation of slums on the outskirts of the main city. Another thing that
proponents say is that by linking rent prices to apartment maintenance and
material improvements, rent control actually improves the state of housing.
Overall, they argue that the goals of rent control can be reached if they are
administered in a careful and just way.

The opponents, though, have both theoretical and practical experience on their
side. First, rent control creates a market that is unfair for everyone. Since
the rent is set at a lower than normal level, an unsatisfied demand is created.
This increase in demand leads to an increase in the cost of rents in the
uncontrolled sector. Thus, two types of rents are created: those that are
unfairly cheap, and those that are unfairly expensive.

Another problem that is created is that landlords who own rent controlled
apartments are often not able to earn enough money to adequately maintain
buildings. This leads to run-down, poor quality housing. In many cases,
landlords lose so much money that they are not able to even pay the debt on the
properties, and they abandon them. Both of these effects have been documented in
New York and elsewhere, and go against the goals of rent control.

Finally, rent control has the bad side effect of turning away new construction.
This is because even if rent controls don't include new constructions, owners
are afraid to build any new buildings if in a few years those too will be taken
over by rent control. Rent control thus leads to less construction and an even
greater unsatisfied demand. This, in turn, increases the rents of uncontrolled
apartments even more. New constructions are also avoided because banks and
insurance companies don't want to invest in areas where rent control is in
effect, because they know that it is likely that landlords will not be able to
pay for the building, and they will lose their investment.

For all of these reasons, I believe that rent control should be abandoned in New
York City. The situation we have is of many run-down buildings that are rent
controlled, and other areas where rent is so expensive that no one from the
middle class can afford to live in them. On top of all this, in New York, many
people rent out their rent controlled apartments for a profit — a practice which
is opposite to the initial spirit of rent control legislation. Without rent
control, the housing situation in New York would be more equitable for everyone,
and the city would benefit.

Critically evaluate the issues in the people versus places controversy.

The people versus places controversy is concerned with two basic philosophies of
distributing benefits with the goal of improving living standards and local
economic development. In basic terms, the "people" approach tends to emphasize
assistance to individuals, giving them tax breaks, financial help, job training,
and migration (to areas of better employment) assistance. The "places" approach
focuses on improving the quality of a place, in the hope that the people who
live there will benefit from the change. In my opinion, both of the approaches
have drawbacks, and a mixture of the two is the best way to solve the problems
of local economic development.

The people approach, based on making individuals more prosperous, is based on
the rationale that only people matter. Those who support it argue that if you
improve the lives of people, it doesn't matter where they live. Thus, they would
argue for job training programs and not for strategies that would try to bring
factories into a certain city.

One of the main negative effects of the people centered approach is that it
encourages migration. This is a disadvantage in the big picture for three
reasons. First, migration away from problem areas of the most qualified only
worsens the situation of those areas. If a city spends money on training people
to become more efficient and better skilled workers, and those people then move
on to find better job opportunities, then that city hasn't succeeded in its
primary goal: to improve the quality of life in its borders. In the end, the
skill level of the local population doesn't improve, in fact, it may decrease.

Another disadvantage of migration is the fact that it leads to the
disintegration of families and communities. When it becomes easy for people to
move from one place to another, then the bonds which strengthen communities fall
apart, and the nation as a whole loses a valuable asset. Finally, politicians,
who rely on the support of their constituents to be elected, are not likely to
support people centered approaches because of migration. There is no reason why
they would want to spend tax money on training people when they cannot be sure
that those same people won't leave the community and enrich another city with
their new skills.

Place centered approaches also have drawbacks. First, much of the benefits go to
the non-poor. This is because the subsidies for industry or other incentives for
growth and improvement are given to those who already have money. These are the
people with enough capital to make a difference in the quality of a place. While
the place centered approach does not foster migration, and therefore it has the
support of politicians, it still is not very popular. Another problem is the
fact that place centered programs often do not help the areas that are in the
most need of help. This is because the aid from these programs goes to the
places with the most potential, not the most need. Finally, a problem with place
strategies is that they do not let the market function freely, and therefore
many economists would argue that efficiency on a national level is reduced. This
would defeat the goal of the program in the big picture.

Overall, both the people and place approaches have advantages and disadvantages.
In choosing which one is best, it is wise to look at the particular needs of
each community, and develop a mixture of the two solutions. For example, in an
area that is very poor, where it is unlikely that business will invest, even
with subsidies, then a people approach may be the only way to improve the local
economic situation. On the other hand, in an area that shows some promise, and
which could improve with the arrival of more jobs, the place approach may be
best suited. In any case, it is impossible to say that one or the other is
better in all instances; and it is essential to remember that neither of them
can offer a perfect solution to the age-old problem of improving a community's
economic health.