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Important Posts
Monthly Archives: September 2014
Effect of Rent Control
Rent Control, like most regulations, distorts markets by imposing factors to mismatch supply and demand. The result is scarcity in what consumers really want, and that results in rising prices, the rent increases and pagidi (Key money) system evolves. The simple presence of rent control, produces shortage of rental housing homes in any area than it would otherwise experience.
If a state has moderate rent control, it will have a moderate housing shortage; if it has severe rent control, it will have a severe housing shortage. The more rent control a state has, the worse the housing crisis becomes, and the worse the housing crisis becomes, the more people demand that rent control be expanded and enforced more severely. Thus the problem increase in multiple progression. The rent control will not solve the problem, but de-regulating will not solve the problem all of a sudden, it will take time to build new buildings and remove the fear factor from the minds of building owners and prospective building owners.
Although rent control is supposed to prevent shift in an urban community toward wealthier residents and/or businesses and increasing property values, it does the opposite. The usual result of rent control is to split the housing market in two. Some people get great deals while others face housing shortages and higher-than-market prices.” The tenants who managed to get rent-controlled units were paying 20-50 percent below market rate of rent, others who want a building on rent has to pay higher rent than normal rate and has to pay huge key money, the building owners demand this due to fear of litigation that follows and the delay it makes.
Under all other welfare systems, the subsidy is underwritten by the public at-large, through taxes. Thus, if the burden becomes too heavy, people are likely to object. But because rent control taxes only landlords – who are always a small minority of the community – no one pays much attention to their situation, their way of taxation is the higher rate of rent and key money.
Landlords also have the option of cutting their own personal profits., some may elect to cover costs by cutting down on maintenance, resulting in deterioration of existing stock in the rental market. The ultimate victims are not landlords or tenants, but a city’s housing stock. Forced to lose money, landlords will eventually find ways to withdraw their property from the market, or they will allow their property to deteriorate until it is worth only what tenants are paying for it. Since the poor are most dependent on rental housing, they are the ultimate victims of the housing crisis.
As problems induced by rent-control progressed the number of vacant buildings, both residential and non-residential, increases.
In areas with rent control there is an ongoing war between landlords and tenants; lawyer-tenants exploit blue-collar landlords through tricky legal procedures, and landlords allow their unprofitable, unsalable buildings to deteriorate. Rent control is the product of the tyranny of the majority that prevent people from exercising their right to built, buy, let and sell in a free market.
Rent Control Act and an Economic analysis of its impact in Kerala
Posted in JNNURM, New Act 2013
Tagged building, building owner, comparative hardship, eviction, kerala, landlord, Rent Control, tenant
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