Policy Alternatives
Most rent controls today are meant to protect lower-income tenants, not
only against “profiteering” by landlords in the face of severe local
shortages but also against the steadily rising cost of housing. The market
solution is to let rents rise sufficiently to cover the rising costs. The higher
rents, however, will force some people to make agonizing choices, both
to economize on housing and to spend a higher proportion of total
income on it, which mean consuming less housing and less of other
things as well.
If governments do not want to accept this market solution, there are
many things they can do, but they cannot avoid the fundamental fact that
good housing requires someone to spend considerable resources. Binding
rent controls create housing shortages. The shortages can be removed
only if the government, at taxpayer expense, either subsidizes housing
production or produces public housing directly.
Alternatively, the government can make housing more affordable to
lower-income households by providing income assistance directly to
these households, thereby giving them access to higher-quality housing
than they could otherwise afford. Whatever policy is adopted, it is
important to recognize that providing greater access to rental
accommodations has a resource cost. The costs of providing additional