Suppose the market determined rent for apartments is too high for common people to afford. If the government comes forward to help those seeking apartments on rent by imposing control on rent, what impact will it have on the market for apartments?
The impact of rent control on market for apartments is given below: (i) The consumers will get inferior quality houses. This is because the builders getting lower price will, in turn, build low-quality houses in order to reduce their cost of production. (ii) Due to rent control, there will be excess demand for apartments. Every person desiring of having apartments will not be able to get the apartments on rent. There will be a long list of waiters. (iii) Since all the persons seeking apartments on rent control will not get the apartments, some of them will be willing to pay higher rent for the apartments. As a result, there will be black marketing for apartments on rent.
