Suppose that a city where rent controls were imposed decides to eliminate this p

Question

Suppose that a city where rent controls were imposed decides to eliminate this policy and instead provide income supplements to low income residents. What will happen to the quantity of rental housing supplied when the rent ceiling is eliminated? Show the effects of income supplement policy on your diagram. Would tenants benefit from this policy? Would landlords benefit? Why do you think that cities resort to rent controls rather than income supplements to help low-income people pay for housing?

Explanation / Answer

It should go up. Because supply goes up when price does. Shift in supply curve to more like what you're used to. Downwards sloping line. Landlords benefit because more money. Tenants get more houses, but they might have to pay more depending on how much the government supplements them. I think they do rent control for two reasons: 1. They don't know good policy (not trained) 2. It's more popular with the residents (doesn't look like welfare etc.)

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