Rent Simulation

Decent Essays

After World War I, the demand for rental housing in New York City threatened to drive rents higher. In order to keep rents from rising to their equilibrium levels, city officials imposed rent ceilings. Over time, the implementation of rent ceilings caused a market shortage to occur because the demand for rent controlled units exceeded the supply. According to the law of supply and demand when the price decreases below the equilibrium point there is a move to the right on the demand curve. Conversely, the decrease in price causes a move to the left on the supply curve. Customers demand more of an item, in this case, housing, when the price is lower; however, the suppliers are willing to supply less at the new lower price. This shift in New …show more content…

New York City actually has two forms of rent regulations: rent control and rent stabilization. Rent controls were the first to be established Post-World War I and now less than 2% of NYC apartments fall into this category (Naked Apartments, 2015). Rent controlled apartments were built before 1947 and have been occupied by the same family since 1971 (Naked Apartments, 2015). Rent Stabilization is the more common form of rent regulation. Once an apartment is rent stabilized the landlord can only increase rent by a small percentage set percentage each year; however, once the rent reaches $2,500 per month or the tenant’s income exceeds $200,000 for two consecutive years the landlord can deregulate the apartment and bring it up to market rates (Naked Apartments, 2015). The income stipulation is a major difference that does not exist for rent controlled apartments and there has been a lot of controversy over the years about the number of rich tenants that are holding onto a rent controlled apartment that could definitely afford to get an apartment on the free …show more content…

Someone renting in an upscale section of Manhattan might pay only $1,000 a month for a three bedroom rent regulated apartment, yet the same apartment could garner upwards of $12,000 per month in the free market (Mceachern, 2014). Since tenants in rent controlled apartments are allowed to stay in their unit until they die and are permitted to leave their apartment to their heirs, the incentive for renters to remain indefinitely in a rent controlled apartment is very high. Renters financially benefit by keeping a rent controlled apartment, even in situations where the apartment may no longer meet their needs. On the other hand, the landlord is certainly the loser in the rent-controlled situation and has an equally high financial incentive to try to get renters out of rent-controlled apartments. Landlords and building owners are not the only ones that fail to benefit in a rent control scenario. Other renters that are lower income and unable to secure a rent controlled apartment because the current renters of a rent controlled apartment hold onto them long term (even when the have the income to afford the free market) also lose out in a rent control situation. The actual renters of the rent controlled apartments, while they benefit financially, sometimes lose out as well because the landlord does not keep up the quality of the apartment. As

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