rent control

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Government control of rents for houses and flats. This may involve setting the levels of rents, or restricting increases. It has been widely adopted, mainly for motives of income distribution, based on the assumption that landlords are richer than tenants, so that controlling rents produces a more equal distribution of real incomes. During inflationary periods lags in adjustment tend to make controlled rents fall below market-clearing levels: this produces excess demand, and necessitates protection of security of tenure for tenants. In the long run rent controls discourage investment in housing for rent, and also discourage maintenance work on rented housing, so that its quality deteriorates. A general situation of excess demand for housing impairs labour mobility, as sitting tenants are unable or unwilling to move.

Subjects: Economics.

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