Rent Control
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excerpt from
SENATE REPORT ON HOUSING ASSISTANCE
DECEMBER 1997
Commonwealth of Australia 1997
ISBN 0 642 25156 8
Rent Control
4.41 The issue of `fair rents' and rent control was raised in evidence. [39] Rent control has been a policy used at various times in a number of countries (including Australia). It springs from the best of motives which is to keep rents down in order to make rental housing more affordable for low income renters. However, all the available evidence shows that rent control has a major impact on supply and the resulting shortages force rent prices up. Critics of rent control point to studies that show that rental prices tend to be evenly distributed above and below a median in areas without rent control while in areas under rent control, the prices cluster well above the median. [40]
4.42 The Canberra study of the effect of rent control found that the effect of rent control on the market became apparent within a fairly short time. It also led one expert to remark:
It is also obvious that the controls have not been effective in helping the low income earner and do in fact provide more benefit to the higher income earners. [41]
4.43 The reason behind the correlation between rent control and high prices is that rent control has an adverse effect on supply. Together with other regulations such as restrictions on evictions, rent control discourages investment by the private investor. [42] This in turn results in accommodation shortages. Although rent control has been in place in Great Britain for many years, that country is now moving away from rent control policies. [43]
4.44 Some critics therefore perceive rent control as a mechanism that helps to keep rental prices down for middle and high income earners and adds to problems of affordability for low income earners. This situation can be made considerably worse if, as is often the case, rent control is confined to a particular region or area. Rent control was introduced in Canberra in 1973 and by 1978, a critic commented:
In a very real sense, it can be said that part of the costs of rent control in Canberra were borne by those least able to cope the poor tenants of Queanbeyan. [44]