Question

Price controls on rents are frequently implemented by governments in an effort to protect renters from high housing prices. Differentiate the type of price control used from other potential price controls, and then formulate reasons as to why governments should be careful when implementing these types of controls.
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Answer 1

The most common price control is setting a fixed rent price to protect the tenants. There are other alternatives to this price control. Also, price control should be carefully implemented.

Rent regulation is a term that refers to a set of laws that focus on ensuring that individuals have access to rented housing.

The rental regulation system has a principe that is:

• Price controls: Set a rent price and set the increase in a percentage of it (the rent is $ 100 and the annual increase is 5%)

There are alternatives price control such as:

• Price according to the type of property: Set a rental price according to the type of property and its benefits (for example pool, garage, garden, etc)

• Price according to the number of tenants: Set a rental price according to the number of people who will inhabit the property

Generally, tenants are allowed to raise the value of the rent each year by a minimal proportion. This is necessary to avoid that the landlord does not increase the rental value in large amounts because the tenant will not have access to the rented house.

However, governments should be careful with this regulations because they can negative afect the landlord by limiting his rights over the property.

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