[Joseph_E._Stiglitz,_Carl_E._Walsh]_Economics(Bookos.org) (1)

Case in Point
RENT CONTROL IN NEW YORK CITY
Rent control creates a housing shortage while, at the same time, it discourages
the construction of new rental housing. In cities with rent control such as New
York, vacancy rates for rental units are quite low, usually around 2 to 3 percent. In
contrast, the vacancy rate normally averages around 7 percent in cities such as
Chicago, San Diego, and Philadelphia that do not have rent control. With many
people struggling to obtain one of the few available apartments, poor people tend
to lose out. Some studies have indicated that rent control in Californian cities such
as Santa Monica and Berkeley lead to increased gentrification as highly educated
professionals hold on to rent-controlled apartments, forcing working-class families
(and students, in the case of Berkeley) to look for housing in surrounding
communities.
It is difficult for newcomers to find rental housing in New York, San Francisco,
and other cities with rent control. Fewer apartments are available, and those that
are tend to be very expensive. For example, a 1997 survey of rents found that the
median rent for an advertised apartment in New York City was about two and a half
times the median rent for all apartments in the city ($1,350) per month for advertised
apartments versus $545 per month for all apartments). In contrast, in
Philadelphia, a city that does not have rent control, the median rent for advertised
apartments was only $2 more per month than the median for all apartments
($500 per month versus $498 per month). There were many more inexpensive
and reasonably priced apartments available in Philadelphia than there were in
New York City. The lack of affordable housing due to rent control forces individuals
to share apartments or live farther away from where they work, thereby
contributing to commuter congestion. 1
Rent control is widespread in New
York City.
PRICE FLOORS
Just as consumers try to get government to limit the prices they pay, so sellers
would like the government to put a floor on the prices they receive: a minimum
wage for workers and a minimum price on wheat and other agricultural products
for farmers. Both groups appeal to fairness, arguing that the price they
are receiving is inadequate to cover the effort (and other resources) they are
contributing.
In many countries, farmers, because of their political influence, have succeeded
in persuading government to impose a floor on the prices of numerous agricultural
products—a price that is above the market equilibrium, as illustrated in
1 William Tucker, “We All Pay for Others’ Great Apartment Deals,” Newsday, May 24, 1986; Tucker, “Moscow
on the Hudson,” The American Spectator, July 1986, pp. 19–21; Tucker, “How Rent Control Drives Out Affordable
Housing,” Cato Policy Analysis No. 274, May 21, 1997.
INTERFERING WITH THE LAW OF SUPPLY AND DEMAND ∂ 93