This research examines the motivations for adopting rent control and discusses a policy alternative designed to respond to the political appeal of rent control while minimising the investment distortion, capricious redistribution and administrative complexity of most controls. The policy involves limiting regulation to those rents paid by households in the tenant population that are deemed unable to afford adequate housing. All rental units in a jurisdiction register their rents with the relevant authority and are assigned a controlled rent. Landlords must charge the controlled rent only for eligible households but receive the difference between that rent and the market rent from the government. The analysis considers the design of such a policy, its behavioural incentives and some administrative implications. There is also consideration of the appeal of this policy relative to both conventional controls and policies more popular in the literature, such as a housing allowance.
Get full access to this article
View all access options for this article.
References
1.
Adams, E.B., Eng, P. and Pringle, J. (1986) A review of the literature relevant to rent regulation . Research Study No. 28. Toronto: Commission of Inquiry into Residential Tenancies.
2.
Arnott, R. (1981) Rent Control and Options for Decontrol in Ontario . Toronto: Ontario Economic Council .
3.
Blinder, A.S. and Rosen, H.S. (1985) Notches, American Economic Review , 75, pp. 736-747.
4.
Block, W. and Walker, M.A. (1988) Entropy in the Canadian economics profession: sampling consensus on the major issues, Canadian Public Policy, 10 (June), pp. 137-150.
5.
Bradbury, K.L. and Downs, A. (Eds) (1981) Do Housing Allowances Work?Washington, DC: Brookings Institution .
6.
Burke, P., Casey, C. and Doepner, G. (1981) Housing affordability problems and housing need in Canada and the United States: a comparative study. Canadian-United States Bilateral Urban Program, Report No. 3. Ottawa: Canada Mortgage and Housing Corporation and US Department of Housing and Urban Development.
7.
Carroll, T.M., Ciscil, D.H. and Chisholm, R.K. (1979) The market as a commons: an unconventional view of property rights, Journal of Economic Issues, 13, pp. 605-627.
8.
Caudill, S.B., Ault, R.W. and Saba, R.P. (1989) Efficient estimation of the costs of rent controls , Review of Economics and Statistics, 71, pp. 154-158.
9.
Decanio, S.J. (1982) Rent control voting patterns, popular views, and group interests, in: M. B. Johnson (Ed.) Resolving the Housing Crisis: Government Policy, Decontrol, and the Public Interest. San Francisco, CA: Pacific Institute for Public Policy Research.
10.
De Leeuw, F. and Ekanem, N.F. (1971) The supply of rental housing, American Economic Review, 61, pp. 806-818.
11.
Depalma, A. (1987a) When is rent control a subsidy for the tenant? , New York Times, 21 June, p. 2 (Real Estate, National Edition).
12.
Depalma, A. (1987b) Are rent vouchers a boon or a bust?, New York Times, 1 November, pp. 1,5 (Real Estate, National Edition).
13.
Downs, A. (1957) An economic theory of political action in a democracy , Journal of Political Economy, 65, pp. 135-150.
14.
Downs, A. (1988) Residential Rent Control: An Evaluation. Washington, DC: Urban Land Institute.
15.
Fallis, G. (1985) Housing Economics. Toronto: Butterworth.
16.
Fallis, G. (1987) Rent control: the citizen, the market, and the state, in: R. J. Arnott and J. M. Mintz (Eds) Rent Control: The International Experience. The Fifth John Deutsch Roundtable on Economic Policy. Kingston: John Deutsch Institute.
17.
Fallis, G. and Smith, L. (1984) Uncontrolled prices in a controlled market: the case of rent control, American Economic Review, 74, pp. 193-200.
18.
Frankena, M. (1975) Alternative models of rent control, UrbanStudies, 12, pp. 303-308.
19.
Friedman, J. and Weinberg, D.H. (1982) The Economics of Housing Vouchers. New York: Academic Press.
20.
General Accounting Office (1986) Housing Allowances: An Assessment of Program Participation and Effects. Washington, DC: General Accounting Office .
21.
Gooderham, M. (1988) Ontario will disregard all of four-year rent study despite $3 million cost, Globe and Mail, 29 January, p. A-1.
22.
Hartle, D.G. (1983) The theory of 'rent seeking': some reflections , Canadian Journal of Economics, 16, pp. 639-654.
23.
Hartle, D.G. (1984) The political economy of residential rent control in Ontario. Research Study No. 12. Toronto: Commission of Inquiry into Residential Tenancies.
24.
Hobson, P.A.R. (1987) The economic effects of the property tax: a survey. Economic Council of Canada, Discussion Paper No. 317. Ottawa: Economic Council of Canada.
25.
Howenstine, E.J. (1986) Housing Vouchers: A Comparative International Analysis . New Brunswick, NJ: Center for Urban Policy Research, Rutgers, The State University of New Jersey.
26.
Inman, R.P. (1987) Markets, governments, and the 'new' political economy , in: A. J. Auerbach and M. Feldstein (Eds) Handbook of Public Economics , Vol. II. Amsterdam: North-Holland.
27.
Kahneman, D., Knetsch, J.L. and Thaler, R. (1986) Fairness as a constraint on profit seeking: entitlements in the market, American Economic Review, 76, pp. 728-741.
28.
Kain, J.F. (1977) An alternative to rent control. Policy Note P77-2 , Department of City and Regional Planning, Harvard University .
29.
Kearl, J.R., Pope, C.L., Whiting, G.C. and Wimmer, L.T. (1979) A confusion of economists ?, American Economic ReviewPapers and Proceedings, 69, pp. 28-37.
30.
Kershaw, D.N. and Williams, R.C. (1981) Administrative issues, in: K. L. Bradbury and A. Downs (Eds) Do Housing Allowances Work?Washington, DC : Brookings Institution.
31.
Knetsch, J.L., Kahneman, D. and McNeill, P. (1984) Residential tenancies: losses, fairness, and regulations. Research Study No. 14. Toronto: Commission of Inquiry into Residential Tenancies.
32.
Linneman, P. (1987) The effect of rent control on the distribution of income among New York City renters, Journal of Urban Economics , 22, pp. 14-34.
33.
Mann, B. and Veseth, M. (1983) Moderate rent controls: a microeconomic and public choice analysis, AREUEA Journal, 11, pp. 333-343.
34.
Marks, D. (1983) Public choice and rent control, Atlantic Economic Journal, 11, pp. 63-69.
35.
Marks, D. (1984a) Housing affordability and rent regulation. Research Study No. 8. Toronto: Commission of Inquiry into Residential Tenancies.
36.
Marks, D. (1984b) The effect of rent controls on the price of rental housing: an hedonic approach, Land Economics, 60, pp. 81-94.
37.
Marks, D. (1984c) The effects of partial-coverage rent control on the price and quantity of rental housing, Journal of Urban Economics, 16, pp. 360-369.
38.
Miron, J.R. and Cullingworth, J.B. (1983) Rent Control: Impacts on Income Distribution, Affordability, and Security of Tenure. Toronto: Centre for Urban and Community Studies, University of Toronto.
39.
Murray, M.P. and Rydell, C.P. (1987) Analyzing rent control: the case of Los Angeles . The RAND Corporation, p-7363-LA.
40.
Nelson, R.H. (1987) The economics profession and the making of public policy, Journal of Economic Literature, 25, pp. 49-91.
41.
Olsen, E.O. (1987) What do economists know about the effect of rent control on housing maintenance?, in: R. J. Arnott and J. M. Mintz (Eds) Rent Control: The International Experience. The Fifth John Deutsch Roundtable on Economic Policy. Kingston: John Deutsch Institute.
42.
Olson, M. (1971) The Logic of Collective Action, revd edn. Cambridge, MA: Harvard University Press .
43.
Orr, L.L., Hollister, R.G. and Lefcowitz, M.J. (1971) Income Maintenance: Inter-disciplinary Approaches to Research. Chicago, IL: Markham .
44.
Oser, A.S. (1986) Manhattanites seen as big gainers from regulation , New York Times, 18 May, p. 2 (Real Estate, National Edition).
45.
Pareto, V. (1896) Cours d'economie politique, in: Sociological Writings, pp. 97-122. Translated by DERIcK MIRFIN, edited by S. E. Finer (1966). London : Pall Mall Press.
46.
Porter, D.O. (1981) Commentary, in: K. L. Bradbury and A. Downs (Eds) Do Housing Allowances Work?Washington, DC : Brookings Institution.
47.
Posner, R.A. (1974) Theories of economic regulation, Bell Journal of Economics, 5, pp. 335-358.
48.
Schultze, C.L. (1978) The Public Use of Private Interest. Washington, DC: Brookings Institution.
49.
Stanbury, W.T. (1984) The normative bases for rent regulation. Research Study No. 15. Toronto: Commission of Inquiry into Residential Tenancies.
50.
Stanbury, W.T. (1986) The origins of rent regulation in Ontario. Research Study 17. Toronto: Commission of Inquiry into Residential Tenancies.
51.
Stigler, G. (1971) The theory of economic regulation, Bell Journal of Economics and Management Science, 2, pp. 3-21.
52.
Struyk, R.J., Marshall, S.A. and Ozane, L.J. (1978) Housing Policies for the Urban Poor. Washington, DC: Urban Institute Press.
53.
Tollison, R.D. (1982) Rent seeking: a survey, Kyklos , 35, pp. 575-602.
54.
Topel, R. and Rosen, S. (1988) Housing investment in the United States, Journal of Political Economy, 96, pp. 718-740.
55.
Trebilcock, M.J., Hartle, D.G., Prichard, R.S. and Dewees, D.N. (1982) The Choice of Governing Instrument. Ottawa: Economic Council of Canada.
56.
Tullock, G. (1975) The transitional gains trap, Bell Journal of Economics, 6, pp. 671-678.
57.
Wilson, J.Q. (1974) The politics of regulation, in: J. W. McKie (Ed.) Social Responsibility and the Business Predicament. Washington, DC: Brookings Institution.
