(group) The rent control ordinances that cities sometimes enact usually try to restrict rent increases to the amount of the owners' cost increases. Use the analysis of this chapter in thinking about the following questions:
What is the cost to a landlord of renting an apartment to you for $500 if someone else is willing to pay $600? What is the benefit of renting to you?
The cost is $100. The benefit of renting to you is not having to pay costs associated with setting up new leases, cleaning, upgrading, etc.
What effect will a rent-control ordinance have on the cost to landlords of letting an apartment unit stand idle, or of using it themselves, or of allowing relatives to live in it rent-free?
It lowers the opportunity cost of those situations. The opportunity is fixed.
What concept of cost do you think supporters of rent controls have in mind when they speak of basing maximum rents on landlord's costs?
They are considering operating costs, not opportunity costs.
Mortgage payments reflect the cost of purchasing a building and hence can usually be included as legitimate costs when landlords operating under a rent control law request rent increases. What determines the cost to a potential landlord of purchasing an apartment building?
The demand for apartments along with the supply of equivalent housing. If other apartments are available at rent-controlled prices, the prospective owner won't be able to charge more than those apartments.
The costs of purchasing fuel for heating purposes can always be included as legitimate costs when landlords request rent increases. What determines fuel prices?
The demand for fuel is determined by the supply of heating alternatives. Assuming the cost to change to new alternatives like electric is high, the demand for fuel will be inelastic, and the supply of heating fuel will govern prices to a point.
Suppose a landlord rents space in a nearby parking lot and makes it available to his tenants. If the demand for parking space in the area rises, he will probably have to pay more to rent parking spaces. Why would a rent control commission be more likely to grant the landlord's request for a rent increase based on the increased demand for parking than for one based on the increased demand for rental housing itself?
Because driving and parking isn't perceived as a necessity as much as shelter is.