Time to End Rent Control in New York
Subject Price Ceilings and its Effect on the Market
Topic Income Distribution and Poverty
Key Words Price Ceilings, Equilibrium, Government Regulations, Inefficiency, Supply and Demand.
News Story

Legislators in New York State have the opportunity to end rent control in New York when it comes up for a vote in June, 2003. Originally intended as a temporary means to control distribution and help minimize price increases caused by shortages, rent control has become a sacred institution in New York. In fact, only about one-third of housing in New York is exempt from controls, and the rest are subject to a sliding scale. The biggest beneficiaries of these controls tend to be those living in Manhattan at the upper end of the income scale, and those who benefit the least live in the outer boroughs, with lower incomes.

According to a study done when Cambridge, Massachusetts, eliminated its rent controls, very little damage is done to the housing market. In fact, in Cambridge, housing investment soared, as predicted by the textbook model of supply and demand.

Lifting rent controls would have significant other benefits as well. It would improve the relationship between landlord and tenant, making their relationship more voluntary than it currently can be considered to be. Further, it would reduce the size of bureaucracy, as it would eliminate a number of positions in place to oversee the rent controls.

Rent control is a plan that may have been worthwhile in its inception, but over 60 years has outgrown its usefulness.

(Updated August 27, 2003)


Using a graph of supply and demand, illustrate the situation created when a ceiling on rents is imposed in a market.

2. On the same graph, illustrate what the article argues is the likely outcome of removing the ceiling.
3. Why does it seem rational that rent controls have remained for 60 years, when they were originally intended to be temporary? Discuss carefully.
Source "The Great Manhattan Rip-off." The Economist. June 5, 2003.

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