Housing Problem

Housing Problem

Housing problem becomes a serious problem in every nation. Just take a look in Canada, more than 11000 people have difficulty in renting a house. Therefore, government should have the obligation to deal with this problem. Rent control, like all government-mandated price controls, is a low placing a maximum price on what landlords may charge tenant. Government will set a price below the original equilibrium price, which is what a price ceiling does. By imposing rent control, the rental price will fall from the original equilibrium (Pe) to a new price (P1) in figure 1. As the price decrease, tenants will spend smaller amount of their income on housing. Thus, imposing rent control helps the low wage earners to rent a house in a lower price.
Unfortunately, there is a serious threat of survival of affordable rental housing behind imposing rent control. Imposing rent control actually decreases the supply of housing. In figure 2, the quantity of supply will decrease from Qe to Q1. This is because as the rent is not allow to increase, there will be no inducement for developers to replace the existing units that wear out or even build new houses. Moreover, the landlords will simply

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