Economics of the Housing Crisis: Rent Control, Supply, and Demand

This essay examines the housing crisis in the US, highlighting the increasing costs of housing and its sociological impacts, such as people shifting to suburbs or facing homelessness. The paper explores the economic principles related to rent control, discussing arguments for and against it. It references studies on rent control's effects on housing supply and investor behavior, particularly in cities like San Francisco and New Jersey. The essay argues that while rent control can help hold down rents, it may also reduce investment and the supply of rental units. It concludes by emphasizing the need for better policies to address the inequalities in the housing market and support the public.

Running head: ECONOMICS
THE HOUSING CRISIS
Name of the student
Name of the University
Author note

2THE HOUSING CRISIS
Experts are of the opinion that the rising housing costs in US is causing major sociological
problem in the US. Studies indicate that more US citizens are facing the issue of the rising rents
and hence are shifting to suburbs to avail more affordable housing or facing homelessness. To
have access to basic living conditions is a basic human right and there should be indeed a
provision which enables the US citizens to have more affordable option without happening their
standard of living as it is now. The lessons in economy teaches us to solve the causative factor of
the problem. Economist argue that there is a downside in keeping rents below the market price
suggesting that it would motivate the landlords to sell the property leading to deficiency in the
rental properties. Recent studies refute these claims as no substantial proof has been made to
support this claim as supply and demand do not have help solving the housing issue in US.
However it has been found that having rent control helps to hold down rents. US has about 200
cities which have some sort of rent control system and is more common in states of New Jersey,
California and New York, many states have eliminated the rent control system altogether.
One of the major issues that rent control affects is the reduction of Return on Investment (ROI),
signifying that less investors will be willing to make new apartments thus reducing the number
of apartments that is available for rent. However, studies conducted on the New Jersey rent
control policies shows that implementing rent control increases the supply of rental houses as
there is incentive for the landlords who feel motivate to subdivide there larger rental units. A
more recent on the San Francisco housing markets indicates rental control had no effect on the
decrease of new housing construction however it did show a negative impact on the supply of
rental housing as thee was an increase in condo conversions. These are the theoretical arguments
which ignore the basis of economics is not only efficiency but creating equal environment for all.
The increase in the housing policies is one of the most inequalities in the society. The gap

3THE HOUSING CRISIS
between the rich and the poor is widening and the more people are living debt this makes the
housing crisis one of the leading issues in the American society. Therefore in conclusion, there
needs to better systems and policies that can aid the public.

4THE HOUSING CRISIS
Reference
Asquith, B., 2019. Do Rent Increases Reduce the Housing Supply under Rent Control? Evidence
from Evictions in San Francisco.
Gilderbloom, J.I. and Ye, L., 2007. Thirty years of rent control: A survey of New Jersey cities.
Journal of urban affairs, 29(2), pp.207-220.