Friday, May 13, 2011

Rent Controls, Price Ceilings and Property Rights

I've been meaning to post this for a number of days now. I apologize for not getting to it more quickly. Recently, I ran across this article about a landlord in San Francisco who is having trouble with the city's rent controls. This is not a new concept for those of us who teach economics. Rent controls are the classic example of a binding price ceiling creating shortages.

What made the article a little different was the fact that it mentioned a portion of the San Francisco law that limits what the owner can do with the property. In this case, the landlord/owner wants to evict a tenant so he can move family into the space. But if he does that, it limits his use of the building in the future. In essence his property rights are restricted in such a way as to make it hard for him to evict the tenant. At the same time, eviction impacts the tenant’s property rights. While the tenant is not the owner, there is an issue of possession.

This makes an excellent discussion piece if you want to tie property rights into price ceilings. I encourage your comments.


Kathryn Peyton said...

The genesis of this requirement is that San Francisco landlords are famous for evicting existing tenants, claiming they need the property for family, putting family in for a brief time, and then re-renting the property or selling it as a condo. It is an attempt to avoid that, by making sure that the family actually needs the space. So, just more of the hoops people must jump through when we artificially restrict markets.

Apartments in Moscow said...

Rent Control restricts the right of an owner to evict tenants and limits the rent an owner may charge for an apartment. It also requires the owner to provide essential services and equipment.