Rent Control
Rent Control — is a governmental measure aimed to control the rent price and protect the householder. These measures are effectuated by the municipalities. Such a measure is discussed by different economists; it has received diametrically-opposed assessments. This practice exists in several states of the USA and other countries.
Measures of Rent Control
Rent control was implemented by the government to suppress the price rise. Rent regulation is one of the policies offered to improve affordability of houses, together with subsidies, vouchers and tax credits.
The rent control is applied to the various types of houses: townhouses, single-family houses, flats, condominiums, etc. In some regions, these regulations are applied to mobile homes. The housing price is indicated in the tenancy agreement. The tenancy agreement is a document that presents the rules for a lessee, the amount and dates of payment, and the signatures of the parties.
Rent control has both pros and cons. In most cases, economists describe it negatively. However, some people think that the uncontrollable growth of rent increases homelessness as more and more people can’t pay for their houses.
Main types of rent control:
- Creation of price ceiling. The government freezes the price for rent on the specific point and refuses to raise it over this level. Typically, the price ceiling is fixed at a rate that existed during the adoption of the law.
- Control of rent. In this case, the rental payments can’t grow, but the government still regulates the prices between rentals.
- Deregulation of vacancies. The municipalities control the prices during the rentals but let them rise between the rentals.
The economists offer various alternative measures instead of rent control like housing allowances, vouchers, and tax exemptions. Such measures could make the rent more affordable for citizens without changing the residential property market too much. However, it will require an increase in government expenditures.
Rent Control in Different Countries
The rules of rent control vary in different countries. In Germany, the rules of rent are described in the Civil Code. The law distinguishes between the rental price at the start of the contract and the increase in rent over the life of the contract. As a rule, the rental price at the initial stage of the contract is determined by an agreement between the landlord and tenant. Only in certain regions with a tight housing market, the rental price at the beginning of the lease is limited by law. Tenants should be noticed about the eviction at least three months before it. They may be obligated to leave the house by legal action for good cause.
In the United Kingdom, the regulation for rental houses was described by the Housing Act of 1988. The main regulatory framework is subject to the "freedom of contract": this means homeowners can set any price. Renting rules apply to few council houses, and often rates set by municipalities reflect rising prices in the unregulated private market.
In Canada, each province has specific regulations concerning the rent. For example, in Ontario, there is a Residential Tenancy Act of 2006 that requires rental property prices to rise no more than 2.5 percent per year or a lower rate set by a government minister. London is known for high prices for rent.
In the United States, the rules for rent are defined by the state. There is a map of rent control where all states are marked regarding the situation with this issue. In some states, rent control is prohibited.
Opinions on Rent Control
The opinions of economists differ on this question. Mostly, they negatively evaluate rent control as it leads to housing deterioration. The landlords don’t have money to repair houses, and they have to sell them. The small landlords get bankrupt and sell their houses to large corporations.
The adepts of the free market criticize rent control. They think that two individuals should make a deal without the state’s intermediary. Some economists offer to increase the rent control for luxury houses and cancel it for modest dwellings. As for the high prices of apartments, the economists offer to build more houses to increase the supply. The increased supply should be a countermeasure against the monopoly of landlords.
Pros of rent control:
- The uncontrollable growth of prices makes moderate-income citizens unable to rent a flat.
- Rent control helps moderate-income people to feel safe and not afraid of homelessness.
- The neighborhood is safer when the residents rent a house for a long term and know each other.
Cons of rent control:
- Rent control makes the rent unprofitable, and landlords convert the houses to condominiums.
- Investment in rental houses becomes useless.
- Maintenance of a rental house becomes too expensive for landlords.
In general, the solution is a combination of different measures. Sometimes the like of rent control leads to the destruction of buildings as they stay abandoned. So, the protectionist measures should be implemented carefully and thoughtfully.
