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< Back to question Are rent caps a good idea? Show more Show less

Rent caps, which set limits on permissible rent charges or cap annual rent increases during tenancies, have been adopted by many cities as a way of curbing rising rents. But do rent caps actually work? Do they keep city rents affordable? Or are they part of the problem?

No, rent caps are not a good idea Show more Show less

Rent caps fail at their basic function of keeping rents affordable.
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Rent caps encourage renters to move into housing not suited for them

Rent caps lead to families holding onto properties that are smaller than they need because of a cheaper price. For single individuals, when family members move out, this leaves them with higher-priced large-style housing.
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Proponents


Context

Imagine a scenario where a family of four lives in a four-bedroom apartment for a decade. Then the two oldest children leave home and move into apartments of their own. The parents, not wanting to lose their discounted rent, opt to stay in the four-bedroom apartment. This is what is known as renter mismatch.

The Argument

When looking for housing, the two things one needs to be concerned about is price and size. Rental caps are being incorporated to make sure rental properties aren’t too expensive. Some housing is specifically used for large families. Others are used for one to two people. Unfortunately, the opposite is becoming more prevalent. Rent controls lead to a misallocation of apartments. Larger families stay within housing for singles while single people have larger apartments. The problem is in the price. Single housing is cheaper than multifamily housing. Families make less money than an individual.[1] Because of the lowered price, families will want to move into a place that does not have enough room for them. When rents remain below market rates, those with access to the lower rates (existing renters) will overconsume. [2] Families shouldn’t have to pay more for rental housing.

Counter arguments

Rental caps are not the problem when it comes to misallocation of apartments. The opposite is true. Rental caps provide a way for all types of families and people to find good housing for a lower price. Without having houses or properties having stacked prices, it gives opportunities for more people to find homes. Having families stay in singes apartments is probably a better solution than having them stay in bigger rental properties. It’s cheaper for them. If families make less than single people, then single people should have no problem staying in a house that’s bigger than what they need. The whole point of rental caps is to make a cheaper solution for all types of people. Plus, rental caps aren’t the ultimate solution to having cheaper housing. Rental caps don’t determine how much someone can make. If a family cannot afford a bigger rental property. They should find ways to make more income. If a single person doesn’t have the funds to live in a bigger house, they should move to a different area.

Premises

[P1] Rental caps lead to misallocation of apartments. [P2] Families shouldn’t have to pay more for housing.

Rejecting the premises

[Rejecting P1] Rental caps bring cheaper housing options to the market. [Rejecting P2] Families should find a way to pay for family style housing if they want it.

References

  1. https://multifamily.fanniemae.com/news-insights/multifamily-market-commentary/growing-mismatch-between-multifamily-supply-and-renter
  2. https://www.brookings.edu/research/what-does-economic-evidence-tell-us-about-the-effects-of-rent-control/

This page was last edited on Friday, 17 Jul 2020 at 13:44 UTC

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