Dr. Christian Niemitz, Head of the Political Economy Department of the Institute for Economic Relations, says “No.”
Rent control is very similar to socialism. Both have been tested dozens of times. Both ended in failure every time. And yet both remain insanely popular. In both cases, supporters will insist that the idea not only did not fail, but that it was not “really” applied.
The most recent example is Berlin (Germany’s own miniature Venezuela), where after the introduction of the rent ceiling, the supply of rental properties entering the market fell by almost half, while it increased in comparable German cities. But, of course, the hat remained.
A high price is just a signal of scarcity. You can ignore such a signal, just as you can turn off the audible signal of a smoke detector. But the underlying problem that triggered the signal in the first place still exists, and now it will simply manifest itself in other ways.
We can only find a way out of this crisis. There are no shortcuts.
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Sarah Arnold, senior economist at the New Economist Foundation, says yes
One in four Londoners lives in the private rental sector, which has grown significantly over the past decades. This sector, which is home to an increasing number of families and older people, is also experiencing a rapid rise in rents, while many young people are completely closed.
Before Covid, average rents in London have grown more than three times faster than average earnings over the past decade, and about a quarter of private households in the capital spent more than half of their income on rent.
Private tenants are among the hardest hit by this pandemic, with 840,000 people behind due payments nationwide as incomes of many tenants fell. The long-term impact of the pandemic on the housing market is far from clear, but affordable rents in London should remain a priority. In many major cities, from Berlin to New York, rent control is the norm. Careful rent control can be the key to creating a fairer and more affordable private rental sector.