Why Rent Control Should Not Be Encouraged In Nigeria

Rent control, like all other government-mandated price controls, is a law placing a maximum price, or a “rent ceiling,” on what landlords may charge tenants. If it is to have any effect, the rent level must be set at a rate below that which would otherwise have prevailed.

If rents are established at less than their equilibrium levels, the quantity demanded will necessarily exceed the amount supplied, and rent control will lead to a shortage of dwelling spaces. In a competitive market and absent controls on prices, if the amount of a commodity or service demanded is larger than the amount supplied, prices rise to eliminate the shortage. But controls prevent rents from attaining market-clearing levels and shortages result.

Though rent control regulates the money landlords would charge before they can lease their property, it does have its effect when implemented. Houses will be on high demand yet the supply to equal the demand would be unavailable. Rent control can be destructive or counterproductive.

Truth be told, “a ceiling on rents reduces the quantity and quality of housing available. An economist once asserted that, “In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing.”

Economists have shown that rent control diverts new investment, which would otherwise have gone to rental housing, toward greener pastures—greener in terms of consumer need. They have demonstrated that it leads to housing deterioration, fewer repairs, and less maintenance. No landlord wants to waste his hard-earned money on the repairs and maintenance of his property when the government controls the returns.

In fact landlord will be less motivated to put out their properties on rent when they can even control the rent. Consequently supply for house will crash heavily while demand continues to be on the rise and invariably the housing deficit increases.

To put it mildly, rent control is really not ideal. Condominiums, office towers, hotels, retail shops and residential rental buildings were built or erected as investments because they have never been subject to rent controls, and no one fears that they ever will be. It is no accident that these facilities boast healthy vacancy rates and relatively slowly increasing rental rates.

In New York, rent control destroyed entire sections of sound housing and led to decay and abandonment throughout the entire five boroughs of the city. These are just few of the many things rent control can cause.

The sitting tenant is “protected” by rent control but, in many cases, receives no real rental bargain because of improper maintenance, poor repairs and painting, and grudging provision of services. The enjoyment he can derive out of his dwelling space ultimately tends to be reduced to a level commensurate with his controlled rent. This may take decades, though, and meanwhile he benefits from rent control.