Suppose rent control is in force in a particular town which rent fixed at a level which is lower than the equilibrium what is most likely to happen if rent control is abolished

Answer 1

If rent control is abolished and the rent is allowed to rise to its equilibrium level, several things are likely to happen:

1. Landlords will have an incentive to invest in their properties and improve them, as they can now charge higher rents to cover their costs and potentially make a profit.

2. The availability of rental housing may increase, as landlords who were previously deterred from renting out their properties due to the low rent control prices may now see it as a profitable endeavor.

3. Tenants may find it more difficult to afford rental housing, especially if the rent increases significantly. This could lead to increased competition for affordable housing and potential displacement of lower-income residents.

4. The housing market may become more efficient, as rents will better reflect the actual market demand and supply dynamics. This could result in a more stable and balanced rental market in the long term.

Overall, abolishing rent control can have both positive and negative effects, depending on the specific circumstances of the housing market in the town in question.