Link to the main article: http://www.nytimes.com/2012/04/24/us/supreme-court-declines-to-hear-rent-control-challenge.html?_r=3
A rent ceiling happens when the government sets the price under the equilibrium price. The rent ceiling law is imposed at about 200 cities in the United States, including New York City, Boston, and San Francisco and most of the country in Asia also has their rent ceiling imposed since early 2000. The purpose of rent ceiling is helping the poor to be able to afford the houses and homeless people. Government also try their best to eliminate the abandon houses by impose rent ceiling. It will help low income people to afford those abandon houses and also help the owners of the abandon houses to overcome their losses. ‘The Global Property Guide’ states that the rent ceiling was imposed by the government because it can help the nations avoid from high rents but it actually brings inefficiency.
In New York City, they have their rent ceiling since 1947. According to Harmons’ lawsuit, it states that the rent ceiling price for New York City is around $1000 in 2008 which is 60% below the market price. When the rent ceiling is set below the equilibrium price, it actually causes shortage. Rent ceiling leads to decrease in supply by the landlords and the rental units will be scarce when rent ceiling is imposed. It can be proven by the graph below as it shows the shortage occurs when rent ceiling in New York City is imposed. 
For example, the equilibrium price for rent is at $1600 per month but the government sets price ceiling at $1000, the landlords cannot set above $1000 as it is illegal region and it must be below the equilibrium price. In this situation, the landlords are not willing to rent their houses for the consumers because the price is lower than the equilibrium price which can brings loss to them. The quantity supplied will decrease from 80 thousands units to 60 thousands units. So, the supply of rental units will be in scarce. On the other hand, the consumer will highly demand on the house rents when the price is lower than the equilibrium price. The quantity demanded is higher than the quantity supplied. Therefore, a shortage will occur there. Rent ceiling also discouraged the landlords to maintain the quality of their rental units. When the quantity demand is high, the suppliers would try their best to reduce the cost of maintenance or even no maintenance so that they would not spend money on the maintenance because the price is set below the equilibrium rent to avoid loss profit.
The graph above shows the inefficiency of rent ceiling. The search activity will increase when rent ceiling is imposed. Search activity defines the time spent to search people to do business for the landlords and the time spent to search rental houses for the nations. When rent ceiling is imposed, renters will spend a lot of time to search on the newspaper or the internet for various prices and opportunity cost will occur. The opportunity cost included the price of the house rents and also the time spent on search. Search activity is expensive because it takes up a lot of costs higher than without rent ceiling. For example, the renters will end up used a lot of costs on petrol or other resources and spend a lot of time on searching because of the limited availability of houses. As for the landlords, they will spend a lot of time to search for their customers and money on the maintenance fees because they cannot find a customer who can pay for the price which they can satisfy. Thus, search activity increased for the renters and landlords when there is a rent ceiling.
Rent ceiling also creates black market as the landlords will find a way to go against the rent ceiling. Black market is an illegal transaction between renters and tenants which go beyond the legal limit price set by the governments. When the rent ceiling is imposed, the availability of rental units will be limit because the landlords are not willing to rent their houses. However, some of the renters will be desperate to rent the houses and the landlords will take this opportunity to offer in a high price which against the rent ceiling. Due to desperation, some of the renters are willing to pay at the price that offered by the landlords. For example, the renters are willing to pay $ 2,800 per month which offered by the landlords even though the legal price is only at $ 1,000 per month because rent ceiling causes limited availability of rental units. From this, there will be reduction consumer surplus and producer surplus occur. Consumer surplus is the benefit received more than the price they paid for it. For example, the renters who involved in black market do not have to spend a lot of time searching and other resources like petrol expenses to search for a house. Producer surplus is the amount received more than the equilibrium price or the cost of production. For example, the legal rent price is at $1000 but some of the renters are willing to pay $2,800 for the rent and it is higher than the equilibrium price. Thus, the landlords will gain extra profit. Deadweight loss will also occur because the quantity of housing supplied is less than the equilibrium quantity. The deadweight loss is loss to the society because rent ceiling causes shortage which makes the nations unable to rent a house.
In conclusion, rent ceiling only benefits the families which have higher income that already lived in a city for a long time. It is because they are able to pay at a higher price which can satisfy the landlords. The newcomers or poor nation will not able to rent any houses as the landlords are not willing to supply the rental units when the rent control is imposed under the equilibrium price. Not only that, the landlords will make a loss when the price is under the equilibrium price because they need to spend a long time to find a customer who can pay higher price which can satisfy them. This causes the renters and landlords to have difficulties. To summarize the whole thing, the rent ceiling creates shortage, increased of search activity and black market which does not benefit the society. Government should do something to overcome the inefficiencies of rent ceiling to avoid unfairness in the society.
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