Rent control movement worldwide
– is it effective in reducing gap
between rich and poor?
By: Shuvam Shrestha (207100)
Rent Control
Rent control refers to government regulations that limit the amount that
landlords can charge tenants for rental housing.
Two main types of
rent control
Rent Stabilization
This type of rent control limits the amount by which
landlords can increase rent from one tenant to the
next. It also often includes additional protections for
tenants, such as the right to renew a lease and
protection from eviction.
Rent Control
This type of rent control sets a maximum rent for
each unit and prohibits landlords from charging
tenants more than the maximum.
A Short History on Rent Control
1. Many historians believe Julius Caesar enacted a law stating
a landlord could not charge more than the ancient Roman
equivalent of $100 per year for a home in Rome.
2. The concept of rent control we’re familiar with today likely
started sometime between World War I and World War II.
3. The growing tension between public landlords and tenants,
though, caused a few specific states and cities to implement
laws of their own.
Rent control and inequality
1. Historically, wars, revolutions, and other disasters—“great levelers”—have
significantly reduced economic disparities.
2. For a long time, the economy and labor income also grew faster than capital income.
However, beginning in the 1980s these trends stagnated or reversed.
3. A report by Mike Erikson, An associate professor, Across the largest 50 cities, median
rent has increased 175% faster than household incomes. For low and middle income
populations in these regions, housing is getting more expensive at a faster rate.
4. When rent control is introduced or strengthened, rents generally decrease.
5. A study by Kholodilin, Konstantin;Kohl, Sebastian in 2022, has found that Strict rent
control reduces inequality
Affordability
Prevents displacement
Neighborhood stability
Does rent control only have upsides?
Rent control does decrease income inequality but
at a price
Rent control curbs inequality in the short run, but has undesirable side effects
The impact of rent control on inequality differs in intensity in the short, medium, and long runs.
The effects are strongest in the short run and decrease over the long run, primarily due to the
fact that market actors adjust to the new conditions.
Though rent control have been put in place by the government, there is no sign of decreasing
economic inequality between the rich and the poor.
Poor housing conditions
Less available rental housing
Higher rents overall.
How the gap between the rich and poor can be reduced?
Progressive income and wealth taxation, may also be more effective in reducing inequality in a
society in the long run without having strong effects on the housing market, albeit possibly
different ones.
A comprehensive mix of fiscal policies can curb inequalities at every stage where they emerge
Opportunities and incentives
Navigating conflicting tensions
References
https://www.weforum.org/agenda/2021/05/why-rentcontrols-won-t-solve-the-urban-housing-crisis/
https://www.livemint.com/Opinion/2sEX5MD7aW1whVkxFllN
CL/Rent-control-is-crippling-Indias-richest-city.html
https://www.econstor.eu/bitstream/10419/252285/1/179962
3297.pdf
https://www.cnbc.com/2021/07/29/rent-controls-arebecoming-a-highly-divisive-issue-in-europe.html
Thank You!