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Benefits of rent control outweigh the costs particularly important in
evaluating the economic implications of rent control. In an unregulated market,
a housing shortage the reason usually cited for imposing rent control will be
addressed in a two-step process. In the short-term, rents on the margin will
rise as consumers compete for available units. Over time, these higher rents
will encourage new investment in rental housing through new construction,
rehabilitation, and conversion of buildings from nonresidential to residential
use until the shortage of housing has been eliminate. Without the increased
rents required to attract new investments, new housing contractions would be
sharply limited and there would be no long term solution to shortage in
housing. Conversely, a fall in rents sends the message to the market that there
is no room for new investments.
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Nov 9th, 2015
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