6/30/2004

The Battle of the Renters

When the government puts a price ceiling on rental homes, it is saying that the demand for rental homes is completely “inelastic”, meaning that people would continue to rent the home indefinitely, even without considering the price. This just isn’t true because if a certain house is going to cost us more than we can afford, we will naturally look for one that is less expensive. This means that if no one could afford to live in the more expensive homes, demand for those homes would decrease and the supply would increase, giving us a surplus of the more expensive homes. This would mean that in order for those landlords to rent their homes so they wouldn’t lose money because of vacancy, they would have to drop their prices to accommodate the demand.

Because the government forces the landlords/homeowners to rent their places out for less than they feel that they deserve, there is less incentive for them to make repairs on the home and keep it nice. This can also be the beginning of a bad relationship between the landlords and their tenants. Allowing renters the freedom to charge whatever price they feel is fair gives all prospective tenants an equal opportunity to rent. If the price is too high, no one will rent and the owner will eventually have to drop the price. This will encourage home owners to rent at a competitive price, and at the same time will persuade tenants to rent within their means. When tenants rent what is affordable, there will be less wasted space, and the homes will be kept in much better condition.

2 comments:

Dr. Tufte said...

This post has spelling, grammar, and logic problems.

Also, I prefer that students link to some content on the internet, rather than writing extemporaneously.

Jordan said...

I think some of the discussion in the first paragraph is backwards, causing logic to be off. However, I agree that putting binding price ceilings on rent amounts could lead to indifferent landlords when it comes to repairs and maintenance. It seems logical that landlords would allow their apartments to eventually become worth what they're receiving. Binding price ceilings result in shortages of demanded goods. If more people want to rent apartments than are being supplied at the rent price, the difference will come from tenants who are willing to deal with shabby apartments and those who aren't. Those who are above living in shabby apartments may opt to buy their own home.