you guys have taught me more economics within in an hour than I have ever learned in school within a semester. thank you so much for making these vids. keep up the great work!
Now i wonder whether that's because you are SEEKING out this video to learn and therefore it has your full attention VS your in classroom - there are distractions, you HAVE to go there everyday so you get complacent with it, You might be tired at school and therefore not fully concentrating, School is also very long so it can be hard to focus through the whole day. The flip side of course would be - what if the school curriculum was that you just had to sit there and watch these types of video for 5 hours every day ... but you couldn't pause it... I wonder how that would affect things.
@@hosseinfaridnasr2778 agreed, I think a combination of both of these methods - i.e. real life teaching vs QUALITY recorded video could be very effective.
"Quickly turn into slums?" Wow. Can you back any of these highly political claims about the negative effects of rent controls with any data or is it just textbook fearmongering of social protections (for low income renters in this case)? I live in a rent controlled apartment, my landlord sold the building to an investment capital fund who wants to redecorate and double the rent. I'm really thankful for the upper limit the control gives us, because my income is extremely low & my neighborhood is getting gentrified to shit
There is no debate about this. Even Keynesian and Marxist economists would be hard pressed to come out in favor of rent-control. Here are some more real world examples for you to look at, from different times and places. Rent Control in Mumbai th-cam.com/video/2fh4tPWYeks/w-d-xo.html&ab_channel=MarginalRevolutionUniversity How Rent Control Hurts Renters th-cam.com/video/Tc8XQGEoEpY/w-d-xo.html&ab_channel=JohnStossel Milton Friedman talks about Rent Control in New York, as well as a whole bunch of other things you may want to know about th-cam.com/play/PLXD32Z5YYifX8J3Kp-WBA9Ongy0p1C1u9.html
So the price of apartments determines the amount of people in need of housing? Doesn't the population determine how many people need housing and not how much apts cost? Regardless of how much an apt costs...I still need a place to live. My need of housing doesn't go away depending on the price of the apt.
No, but how you accommodate your need for housing will change. When I was moving out of my parent's place, the price of housing was a factor. So let's leave behind all other factors, like distance from work or family and just focus on price. If an apartment is too expensive, I'm not going to rent it. Period. I can't rent it, really. Because most landlords require that I only pay a certain amount of my wages on rent, at least in the city I live in. That could leave me to make other choices like living with my parents or even getting housing in a different city. This is where the demand goes down. Because if I have arrangements to live with my parents, then I don't need housing anymore. My demand is fulfilled. Or if I move to another city where rent isn't so high, my need is met.
Rules and regulations can be made that constrain the supply of housing, and credit and tax laws can allow speculators to make money despite owning a vacant apartment (meaning less need to reduce rent cost). Supply & Demand is true, but misleading in the real world which relies on more complex variables. libertystreeteconomics.newyorkfed.org/2019/04/is-the-recent-tax-reform-playing-a-role-in-the-decline-of-home-sales.html
Bicycle Ninja Lol in reality, when rent gets higher than it should be, the homeless population increases. I’m not in favor of rent control bc I’ve never seen it work. But if you make a price ceiling above the market EQ, in theory it should work.
Optimistic cases are, by definition, those where the quantity supplied does not decrease too much relative to the quantity demanded (where excess demand is lowest). That happens when elasticity of supply is low. Certain kinds of services which are provided not primarily for remuneration are good examples. Painters or religious preachers who paint or preach because they are passionate about what they do, will paint or preach as much and at the same quality even if with price ceilings for artwork / religious services.) Maybe politicians who simply want power even if they don;t make too much money are another. Pessimistic cases are those elasticity of supply is high. Elasticity of supply is high where suppliers can redirect at low cost all skills and capital towards something else. A price ceiling on iron ore would drive the mining industry away from iron ore towards the extraction of other ores.
Hey there, I'm writing a paper on The economical Effects of Rent Controls in Theory and in Practice. I would really appreciate it if you could send me the sources you've used for this video, since little can be found on the Internet. Thanks :)
My husband gave up his rent control apartment on the Upper East Side for me. It wasn’t legal to keep the apartment for occasional use, though we did get a buyout when they realized we were gone. He got a rent control apartment (1 bedroom, $600/month, upper east side) as a Sr.-VP with zero dependents because his father was a developer. That has always been my issue with rent control- it doesn’t go to the ones who need it. There are better programs for that.
In Toronto, buildings before 1991 were rent control while those built after were exempted. There has been no effect on the number of purpose build rentals. Instead most buildings have been cheaply built condos that that investors use to speculate on. The investor doesn't do repairs mostly and renter are left to fend for themselves despite the absolutely ridiculous rent. The pre-1991 ones are surprisingly in a much better condition. Most landlords are renovating lobbies and focusing on general upkeep.
This ignores an important factor: people can actually afford houses. Rent control means that it becomes more valuable to sell land/homes to the people who will actually live there rather than landlords. For that reason, more people will be able to own homes. That's the entire point of rent caps. We want more land/homes accessible to own rather than an ever increasing rental market. We WANT rentals to only be necessary for those who plan on moving at the end of their lease. Rentals shouldn't have to be long-term housing.
ปีที่แล้ว
The Colombian government sometimes gives houses for free (in theory to displaced people, but you see every opportunist there), which cannot be sold and you are supposed to live there. Yet, you check certain websites and see people trying to sell them (in the black/informal market, as people in communist Cuba do to rent houses). Also, many of those neighborhoods are shitholes, because there is no barrier to enter there and along with the good people, bad people ends up there. If housing was forced to be affordable everywhere, do you think people would be eager to live in the periphery of cities? Most would want to live downtown (or wherever the "action" is). Is housing not affordable in a lot of cities in the US (or the UK, Spain, Italy, whatever country you want)? People just won't move there because there are no jobs, crime is rampant, etc. Rental markets are not "ever increasing". People are moving away from California and other expensive states for the same reason. On the other hand, in places where rent is high, people earn a lot (and those who do not, are simply pushed to more affordable areas of the state/country). Would creating incentives to start businesses outside of big cities not be better?
But this video presupposes that there are no non-profit housing corporations (which there are in many European nations, which build and maintain social housing) nor government subsidies to these parties.
See the whole playlist, not just this video. They discuss the general effects of subsidies, and the function of price system in other videos. Profit is a good thing.
There is one more variable that keeps rents very high. Easy credit. If credit is too easy to get it essentially creates a subsidy indirectly to that asset. In this case housing. People should not try to vote for rent control but rather instill rules for getting money for a mortgage hard. Increase mortgage interest rates and by law require every person to put 20 percent down. The price of housing would go down dramatically and become affordable again.
SmileyFaceTony more difficult credit will be harsher on new graduates, which would drive them away from businesses looking to recruit new students. This could cause large businesses to migrate out of the city, which could be disastrous.
I disagree. There should neither be any rent control, nor should there be any rules for mortgage. If a bank is giving loans easily, so be it. If people don't pay back, its the banks problem. Not the public. Ofcourse in the end if the govt goes and bails the banks out, that is WRONG. LET THEM FAIL.
In the case of the united states and it's social structure that is absolutely correct and there are many indifference and also many similarities in other parts of the world which i find truly ironic :D
Rent control doesn't create shortage. Without rent control there are no more housing in existence. You have shortage of housing already, dependless what you do with rent control. You just have different reasons to not get what you want. Without rent control supply shortage represents in pricing out most people. In practice you don't see how more apartmemts builds in place where prices are high. Laws and natural limits of land are in game and you cant ignore them and assume somethere in far and great future supply of housing will match demand. We had this BS around 40 years and problem just get only worse.
I have a house that was recently placed on rent control (2 years ago-supposedly temporary but we'll see). Now that house is being rented for below market rate. I'm not happy about that. If I sell the house because I'm not happy with the rent I'm getting, another family will buy it and live in it themselves. There you go - one less rental property on the market and this contributes to a shortage of rental properties. The effect might not be immediate but it is certainly there. Now image more landlords doing the same. And why would I build a new house to rent out if rent control means within a few years the house will be rented out below the market rate? Rent control in the short term helps some tenants with below market rate rent but it hurts the landlords immediately. Most landlords here are ordinary working families- not some "greedy faceless corporation". Why should the government force me to be a charity and subsidise someone else's rent? In the long term tenants are worse off too. New tenants will have to pay market rates at least at first and the rates will be higher because of reduced supply.
@@visearms5774 if you will sell house, there will be no less overall supply in housing. -1 property to rent +1 property to buy = 0 outcome. Landlord not produce land which he/she occupy. That's key feature of land - land rent. It's two edged sword: you can happily extract it while sky is sunny, but nobody will protect your income in rainy day, because rent is unearned income and socially unacceptable.
@@Acid31337 Yes there will be less overall supply in housing - just not right away. I don't know why this is so hard for you to understand. And immediately there will be one less house to rent on the market. I have a house. It is rented out. I sell the house cause I'm tired of rent controls and I want to get out of the landlord business. Another family buys the house and lives in it My house is no longer available to rent. Because the family bought my house they now no longer will build a new house to live in. Even if they had no plans to build a new house somewhere down the line in this chain reaction 1 less house will be built. I suggest you read Sowell's book "Economic Facts and Fallacies" Rent controls over time increase rents overall; by reducing supply. This has happened in every single place where rent controls exist. This isn't some theoretical exercise. This is exactly what happens.
@@visearms5774 absolute rubbish. People bought a home they wanted and became its owner - the same house you used to overprice the living crap of most of the people, yes, now the house is not anymore in rent marketing BUT it served its HIGHER purpose - to finally find an owner who wants it! So, it actually fixed the problem - of family wanting to find a place to live. Landlords will not build houses anyway - they only rent. It is other companies that build houses because of the market need, they do not care about you, they can do their business without you, a leecher in the housing system. Rent is actually the symptom of housing being too overpriced. Yeah, rents would go down - but buying houses would go up, cuz in the longer run market would fix itself, change prices, and buying houses would become more affordable.
@@mikali1704 You have never opened an economics book have you? I have a rental home. I'm tired of giving supsidized rent to tenants. I sell it. Yes I family buys it that want's to live in it. 1 less rental home available, Less rental homes = more demand=higher prices. Because this family bought my home somewhere down the line 1 less house gets built. I challenge you to find a city where rent control has lowered prices. You won't find it.
Rent control has three sources, all political. To understand these sources we need to distinguish between two sense of the word "rent". One sense of the word denotes the phenomenon of rent as payment made for lease. Example: "I haven't paid my rent." The other is the phenomenon of rent as gains over and above the gains that can be made on a market which is unhampered by politics. Example "Interest groups seek to obtain rents." I'll use "rent" here for the first sense of the word and "RENT" for the second sense. The first source of rent control is a demand special interest group, for example a labor union in a city. A labor union puts political pressure on the municipal council to lower rents in the neighborhood or dorm area close to the factory, so that workers benefit from smaller prices. The workers believe it's a good idea. For some of them might be actually a good idea even if they understand economics because some them might not care about the lowering in the quality of building maintenance (this is only a problem in the long run and until that time they might move to a different place anyway), they might not fear that building owners kick them out, since they may have secured a long term and collective contract, with the help of the municipality, and since they might not care that, if the measure is generalized in the city, developers would build fewer buildings for rent (other peopel would suffer not 'them' personally.) They are able to pressure the municipality because they are a concentrated group who can create political trouble. They are a block of people who can vote against those politicians, they are a block of people who can raise funds quickly to sink a politician or raise his status, they can threaten with strikes, in general they have a strong political voice, and in some cases even a violence potential. (A lot of this can be explained with the help of Mancur Olson's theory of interest groups.) The second source is a supply special interest group such as a real estate developer. In the same example, a real estate developer might actually want rent control for many reasons. Sometimes they receive subsidies from the municipal council (at the tax payers' expense who either don't understand economics or if they do, they are better off paying taxes than organize political opposition). This is the standard theory of regulation as RENT-seeking The developer counts as someone who seeks or searches to obtain rents. (See George Stigler and Gordon Tullock for more on this). The third source is the group of politicians in the municipality, who buy the favor of the union at the tax payers' expense, and, even of developers don't like it, they force them to accept it. This phenomenon is called RENT-extraction. Politicians extract rents from private business owners, in this case, developers who do not want rent control measures. In most cases politicians extract informal payments, (bribes) in exchange for not passing harmful regulation. But to make that threat credible, politicians pass some harmful regulation, in our example in the form of rent controls, but forbear to pass even more harmful regulation. (See Robert McChesney for more on this.)
Voters love it. When you hear "Rent control," it basically sounds like free money and if most of your consumers rent in your area, you want that vote. I live in San Francisco and they absolutely love it.
Instead of rent controls we need to get rid of laws and regulations that constrain supply of housing. Politicians actually favor both rent-control (reduce supply) and regulations(reduce supply) as this will increase homelessness that will help the politicians get elected: politicians need "need" or else.
Thanks Can you do a series on rent control? They’re spreading rent control statewide in California. Massachusetts Oregon. Washington and soon Florida and New York State. A new updated
@@MarginalRevolutionUniversity Here in Brazil we're facing a huge inflation and I did realize that the quantity of any given product is now lower. For instance, let's take potato chips: a 13oz bag is now a 10oz bag for the same price.
How does introducing a ceiling increase demand in this context? There's a finite number of people, presumably they're not going to go out and rent multiple units just because it's a little cheaper. The main reason for high rents in urban areas is high demand and limited supply, the actual cost of operating the rental property (maintenance, taxes, etc.) is largely irrelevant.
+GaskellleoCinema To clarify, it increases the quantity demanded, not the demand. Check out at about minute 12 of this video for more on that distinction: th-cam.com/video/_8T8glylBFc/w-d-xo.html Why does the quantity demanded go up? You might be right that there wouldn't be a great response to a price drop - in that case the demand curve would be inelastic - we'd have to examine the data on any particular rental market to know. However, even then, quantity demanded would go up. Just think of all the people who might be sharing an apartment or living with their parents or perhaps even delaying a move to the area because of their budget. Those types of consumers would all respond to a price change by increasing their quantity demanded. Hope that helps, Roman
Try our price ceilings interactive practice: mru.io/1un
you guys have taught me more economics within in an hour than I have ever learned in school within a semester. thank you so much for making these vids. keep up the great work!
Now i wonder whether that's because you are SEEKING out this video to learn and therefore it has your full attention VS your in classroom - there are distractions, you HAVE to go there everyday so you get complacent with it, You might be tired at school and therefore not fully concentrating, School is also very long so it can be hard to focus through the whole day. The flip side of course would be - what if the school curriculum was that you just had to sit there and watch these types of video for 5 hours every day ... but you couldn't pause it... I wonder how that would affect things.
@@philsomething8313 Now we can see how much he quality of education has fallen due to the quarantine mixing downsides from both of these methods.
@@hosseinfaridnasr2778 agreed, I think a combination of both of these methods - i.e. real life teaching vs QUALITY recorded video could be very effective.
"Quickly turn into slums?" Wow.
Can you back any of these highly political claims about the negative effects of rent controls with any data or is it just textbook fearmongering of social protections (for low income renters in this case)?
I live in a rent controlled apartment, my landlord sold the building to an investment capital fund who wants to redecorate and double the rent. I'm really thankful for the upper limit the control gives us, because my income is extremely low & my neighborhood is getting gentrified to shit
There is no debate about this. Even Keynesian and Marxist economists would be hard pressed to come out in favor of rent-control. Here are some more real world examples for you to look at, from different times and places.
Rent Control in Mumbai
th-cam.com/video/2fh4tPWYeks/w-d-xo.html&ab_channel=MarginalRevolutionUniversity
How Rent Control Hurts Renters
th-cam.com/video/Tc8XQGEoEpY/w-d-xo.html&ab_channel=JohnStossel
Milton Friedman talks about Rent Control in New York, as well as a whole bunch of other things you may want to know about
th-cam.com/play/PLXD32Z5YYifX8J3Kp-WBA9Ongy0p1C1u9.html
Here ye!
So the price of apartments determines the amount of people in need of housing? Doesn't the population determine how many people need housing and not how much apts cost? Regardless of how much an apt costs...I still need a place to live. My need of housing doesn't go away depending on the price of the apt.
Yes the video is disingenuous and is setting up a strawman argument and hypothetical situation which can easily be attacked.
No, but how you accommodate your need for housing will change. When I was moving out of my parent's place, the price of housing was a factor. So let's leave behind all other factors, like distance from work or family and just focus on price. If an apartment is too expensive, I'm not going to rent it. Period. I can't rent it, really. Because most landlords require that I only pay a certain amount of my wages on rent, at least in the city I live in. That could leave me to make other choices like living with my parents or even getting housing in a different city. This is where the demand goes down. Because if I have arrangements to live with my parents, then I don't need housing anymore. My demand is fulfilled. Or if I move to another city where rent isn't so high, my need is met.
Sorry but how exactly does a fenomenon supported by evidence (even one of them was mentioned) can be call appropriately an "hypothetical situation"?
Rules and regulations can be made that constrain the supply of housing, and credit and tax laws can allow speculators to make money despite owning a vacant apartment (meaning less need to reduce rent cost). Supply & Demand is true, but misleading in the real world which relies on more complex variables.
libertystreeteconomics.newyorkfed.org/2019/04/is-the-recent-tax-reform-playing-a-role-in-the-decline-of-home-sales.html
Bicycle Ninja Lol in reality, when rent gets higher than it should be, the homeless population increases. I’m not in favor of rent control bc I’ve never seen it work. But if you make a price ceiling above the market EQ, in theory it should work.
This should encourage everyone from California to vote no on Prop 10!
Californians are known to be math-deficient people
What are the examples of the most optimistic and the most pessimistic case of a price ceiling?
Optimistic cases are, by definition, those where the quantity supplied does not decrease too much relative to the quantity demanded (where excess demand is lowest). That happens when elasticity of supply is low. Certain kinds of services which are provided not primarily for remuneration are good examples. Painters or religious preachers who paint or preach because they are passionate about what they do, will paint or preach as much and at the same quality even if with price ceilings for artwork / religious services.) Maybe politicians who simply want power even if they don;t make too much money are another. Pessimistic cases are those elasticity of supply is high. Elasticity of supply is high where suppliers can redirect at low cost all skills and capital towards something else. A price ceiling on iron ore would drive the mining industry away from iron ore towards the extraction of other ores.
Hey there, I'm writing a paper on The economical Effects of Rent Controls in Theory and in Practice. I would really appreciate it if you could send me the sources you've used for this video, since little can be found on the Internet. Thanks :)
My husband gave up his rent control apartment on the Upper East Side for me. It wasn’t legal to keep the apartment for occasional use, though we did get a buyout when they realized we were gone.
He got a rent control apartment (1 bedroom, $600/month, upper east side) as a Sr.-VP with zero dependents because his father was a developer. That has always been my issue with rent control- it doesn’t go to the ones who need it. There are better programs for that.
In Toronto, buildings before 1991 were rent control while those built after were exempted. There has been no effect on the number of purpose build rentals. Instead most buildings have been cheaply built condos that that investors use to speculate on. The investor doesn't do repairs mostly and renter are left to fend for themselves despite the absolutely ridiculous rent. The pre-1991 ones are surprisingly in a much better condition. Most landlords are renovating lobbies and focusing on general upkeep.
Sure buddy whatever you say.
This ignores an important factor: people can actually afford houses. Rent control means that it becomes more valuable to sell land/homes to the people who will actually live there rather than landlords. For that reason, more people will be able to own homes. That's the entire point of rent caps. We want more land/homes accessible to own rather than an ever increasing rental market. We WANT rentals to only be necessary for those who plan on moving at the end of their lease. Rentals shouldn't have to be long-term housing.
The Colombian government sometimes gives houses for free (in theory to displaced people, but you see every opportunist there), which cannot be sold and you are supposed to live there. Yet, you check certain websites and see people trying to sell them (in the black/informal market, as people in communist Cuba do to rent houses). Also, many of those neighborhoods are shitholes, because there is no barrier to enter there and along with the good people, bad people ends up there.
If housing was forced to be affordable everywhere, do you think people would be eager to live in the periphery of cities? Most would want to live downtown (or wherever the "action" is). Is housing not affordable in a lot of cities in the US (or the UK, Spain, Italy, whatever country you want)? People just won't move there because there are no jobs, crime is rampant, etc.
Rental markets are not "ever increasing". People are moving away from California and other expensive states for the same reason. On the other hand, in places where rent is high, people earn a lot (and those who do not, are simply pushed to more affordable areas of the state/country). Would creating incentives to start businesses outside of big cities not be better?
But this video presupposes that there are no non-profit housing corporations (which there are in many European nations, which build and maintain social housing) nor government subsidies to these parties.
See the whole playlist, not just this video. They discuss the general effects of subsidies, and the function of price system in other videos. Profit is a good thing.
could anyone please tell me where this graph with rent-controlled and non-rent-controlled comes from?
Ontario Canada
From where did you get the data for graph of Ontario Canada
There is one more variable that keeps rents very high. Easy credit. If credit is too easy to get it essentially creates a subsidy indirectly to that asset. In this case housing. People should not try to vote for rent control but rather instill rules for getting money for a mortgage hard. Increase mortgage interest rates and by law require every person to put 20 percent down. The price of housing would go down dramatically and become affordable again.
SmileyFaceTony more difficult credit will be harsher on new graduates, which would drive them away from businesses looking to recruit new students. This could cause large businesses to migrate out of the city, which could be disastrous.
I disagree. There should neither be any rent control, nor should there be any rules for mortgage. If a bank is giving loans easily, so be it. If people don't pay back, its the banks problem. Not the public. Ofcourse in the end if the govt goes and bails the banks out, that is WRONG. LET THEM FAIL.
In the case of the united states and it's social structure that is absolutely correct and there are many indifference and also many similarities in other parts of the world which i find truly ironic :D
It's ridiculous that this has to be explained to anyone over 18 in the United States.
Rent control doesn't create shortage. Without rent control there are no more housing in existence. You have shortage of housing already, dependless what you do with rent control.
You just have different reasons to not get what you want. Without rent control supply shortage represents in pricing out most people.
In practice you don't see how more apartmemts builds in place where prices are high. Laws and natural limits of land are in game and you cant ignore them and assume somethere in far and great future supply of housing will match demand. We had this BS around 40 years and problem just get only worse.
I have a house that was recently placed on rent control (2 years ago-supposedly temporary but we'll see). Now that house is being rented for below market rate. I'm not happy about that. If I sell the house because I'm not happy with the rent I'm getting, another family will buy it and live in it themselves. There you go - one less rental property on the market and this contributes to a shortage of rental properties. The effect might not be immediate but it is certainly there.
Now image more landlords doing the same. And why would I build a new house to rent out if rent control means within a few years the house will be rented out below the market rate?
Rent control in the short term helps some tenants with below market rate rent but it hurts the landlords immediately. Most landlords here are ordinary working families- not some "greedy faceless corporation". Why should the government force me to be a charity and subsidise someone else's rent?
In the long term tenants are worse off too. New tenants will have to pay market rates at least at first and the rates will be higher because of reduced supply.
@@visearms5774 if you will sell house, there will be no less overall supply in housing. -1 property to rent +1 property to buy = 0 outcome. Landlord not produce land which he/she occupy.
That's key feature of land - land rent. It's two edged sword: you can happily extract it while sky is sunny, but nobody will protect your income in rainy day, because rent is unearned income and socially unacceptable.
@@Acid31337 Yes there will be less overall supply in housing - just not right away. I don't know why this is so hard for you to understand. And immediately there will be one less house to rent on the market.
I have a house. It is rented out. I sell the house cause I'm tired of rent controls and I want to get out of the landlord business. Another family buys the house and lives in it My house is no longer available to rent.
Because the family bought my house they now no longer will build a new house to live in. Even if they had no plans to build a new house somewhere down the line in this chain reaction 1 less house will be built.
I suggest you read Sowell's book "Economic Facts and Fallacies"
Rent controls over time increase rents overall; by reducing supply. This has happened in every single place where rent controls exist. This isn't some theoretical exercise. This is exactly what happens.
@@visearms5774 absolute rubbish. People bought a home they wanted and became its owner - the same house you used to overprice the living crap of most of the people, yes, now the house is not anymore in rent marketing BUT it served its HIGHER purpose - to finally find an owner who wants it! So, it actually fixed the problem - of family wanting to find a place to live.
Landlords will not build houses anyway - they only rent. It is other companies that build houses because of the market need, they do not care about you, they can do their business without you, a leecher in the housing system.
Rent is actually the symptom of housing being too overpriced. Yeah, rents would go down - but buying houses would go up, cuz in the longer run market would fix itself, change prices, and buying houses would become more affordable.
@@mikali1704 You have never opened an economics book have you? I have a rental home. I'm tired of giving supsidized rent to tenants. I sell it. Yes I family buys it that want's to live in it. 1 less rental home available, Less rental homes = more demand=higher prices. Because this family bought my home somewhere down the line 1 less house gets built.
I challenge you to find a city where rent control has lowered prices. You won't find it.
I'm confused, in the long run wouldn't be there a change in supply curve rather than elasticity of supply?
Why do we have rent controls if they are so bad?
Rent control has three sources, all political. To understand these sources we need to distinguish between two sense of the word "rent". One sense of the word denotes the phenomenon of rent as payment made for lease. Example: "I haven't paid my rent." The other is the phenomenon of rent as gains over and above the gains that can be made on a market which is unhampered by politics. Example "Interest groups seek to obtain rents." I'll use "rent" here for the first sense of the word and "RENT" for the second sense.
The first source of rent control is a demand special interest group, for example a labor union in a city. A labor union puts political pressure on the municipal council to lower rents in the neighborhood or dorm area close to the factory, so that workers benefit from smaller prices. The workers believe it's a good idea. For some of them might be actually a good idea even if they understand economics because some them might not care about the lowering in the quality of building maintenance (this is only a problem in the long run and until that time they might move to a different place anyway), they might not fear that building owners kick them out, since they may have secured a long term and collective contract, with the help of the municipality, and since they might not care that, if the measure is generalized in the city, developers would build fewer buildings for rent (other peopel would suffer not 'them' personally.) They are able to pressure the municipality because they are a concentrated group who can create political trouble. They are a block of people who can vote against those politicians, they are a block of people who can raise funds quickly to sink a politician or raise his status, they can threaten with strikes, in general they have a strong political voice, and in some cases even a violence potential. (A lot of this can be explained with the help of Mancur Olson's theory of interest groups.)
The second source is a supply special interest group such as a real estate developer. In the same example, a real estate developer might actually want rent control for many reasons. Sometimes they receive subsidies from the municipal council (at the tax payers' expense who either don't understand economics or if they do, they are better off paying taxes than organize political opposition). This is the standard theory of regulation as RENT-seeking The developer counts as someone who seeks or searches to obtain rents. (See George Stigler and Gordon Tullock for more on this).
The third source is the group of politicians in the municipality, who buy the favor of the union at the tax payers' expense, and, even of developers don't like it, they force them to accept it. This phenomenon is called RENT-extraction. Politicians extract rents from private business owners, in this case, developers who do not want rent control measures. In most cases politicians extract informal payments, (bribes) in exchange for not passing harmful regulation. But to make that threat credible, politicians pass some harmful regulation, in our example in the form of rent controls, but forbear to pass even more harmful regulation. (See Robert McChesney for more on this.)
Voters love it. When you hear "Rent control," it basically sounds like free money and if most of your consumers rent in your area, you want that vote. I live in San Francisco and they absolutely love it.
Cause people don’t understand economics
@@IonSterpan I know this is 1 year old but it was a great read. Thanks a lot!
Instead of rent controls we need to get rid of laws and regulations that constrain supply of housing. Politicians actually favor both rent-control (reduce supply) and regulations(reduce supply) as this will increase homelessness that will help the politicians get elected: politicians need "need" or else.
Thanks Can you do a series on rent control? They’re spreading rent control statewide in California. Massachusetts Oregon. Washington and soon Florida and New York State. A new updated
Have you seen this one we did in India? th-cam.com/video/2fh4tPWYeks/w-d-xo.html
-Roman
@@MarginalRevolutionUniversity Here in Brazil we're facing a huge inflation and I did realize that the quantity of any given product is now lower. For instance, let's take potato chips: a 13oz bag is now a 10oz bag for the same price.
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Who cares about that let those landlords to raised the rent what ever they want .
They can't raise it to whatever they want. If nobody can afford the rent, the landlord will make zero money from it.
Nice
are you a freedman ecomist?
9:20 more fewer 😖😣😫
5:00 hmm
Lots of scary words, but no why's
this is awesome!
How does introducing a ceiling increase demand in this context? There's a finite number of people, presumably they're not going to go out and rent multiple units just because it's a little cheaper. The main reason for high rents in urban areas is high demand and limited supply, the actual cost of operating the rental property (maintenance, taxes, etc.) is largely irrelevant.
+GaskellleoCinema To clarify, it increases the quantity demanded, not the demand. Check out at about minute 12 of this video for more on that distinction: th-cam.com/video/_8T8glylBFc/w-d-xo.html
Why does the quantity demanded go up? You might be right that there wouldn't be a great response to a price drop - in that case the demand curve would be inelastic - we'd have to examine the data on any particular rental market to know. However, even then, quantity demanded would go up. Just think of all the people who might be sharing an apartment or living with their parents or perhaps even delaying a move to the area because of their budget. Those types of consumers would all respond to a price change by increasing their quantity demanded.
Hope that helps, Roman