Question: In your opinion, what would happen in the short and long term if the government did away with controls on housing (rent controls) and wages? e.g. equilibrium price/quantity, supply/demand, consumption, equity, availability, etc.
In order to understand what would happen in the short and long term if the government eliminated rent and wage controls, we first need to understand the impacts they have on our economy toady. I will start with rent control:
• It is a known fact that rent control creates a destructive shortage of apartments by setting the price below the market’s equilibrium price.
• We are told rent controls are put into place to keep apartments affordable for low and mid-income tenants. Although I am sure the idea was well intentioned, in most cases, I feel it is more of a political strategy to win over voters.
• Due to the shortage of apartments and housing in rent controlled environments, the left over demand floods the un-regulated markets causing property owners and landlords to charge unreasonable rents to subsidize the fear of potential regulation in the future. This further skews the price stability of the housing market for a given area.
• Last, rent control diverts investment in dwellings, which may need it the most, and tenants are forced to live in sub-standard dwellings. If an investor purchased a rental property for income purposes and is now limited to unreasonable returns, what keeps them from cutting their losses and diverting their funds to other investments that promise a greater return?
If the government eliminated rent control, I feel to following effects would be prevalent now and in the long run:
• The market system would inevitable regulate itself, finding an equilibrium between ...
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• Last, many current minimum wage workers may be inspired to work harder at mastering their skill or educating themselves to become more productive members of society versus sitting back and waiting for another pay raise in the form of an increase to the minimum wage.
There is a place for limited oversight and regulations to control the “greed” aspect that is found in capitalism, but it is just irresponsible for governments to uphold policies that were mandated decades ago for economic conditions that no longer apply. Polices like rent and wage control need to be proven legitimate with facts, otherwise abolished. The bottom line is rent and wages, like the prices of everything else, are set in response to market conditions of supply and demand. We need to get back to basics and have trust in the free market system that made this country great in the first place.
“The housing market will get worse before it gets better” –James Wilson. The collapse of the United States housing market in in 2008 was one of the most devastating moments for the world economy. The United Sates being arguably the most important and powerful nation in the world really brought everyone down with this event. Canada was very lucky, thanks to good planning and proper preventatives to avoid what happened to the United States. There were many precursor events that occurred that showed a distinct path that led to the collapse of the housing market. People were buying house way out of their range because of low interest rates, the banks seemingly easily giving out massive loans and banks betting against the housing market. There were
New York City is not only a tourist attraction, but considered one of the most expensive cities in the world to fund because of its superb security, overall popularity, and partly its dependence on Wall Street to pay high income taxes to fund social programs, such as those who help homeless individuals and low-income residents. Ever since Bloomberg's re-election in 2005 he warned New Yorker's that because of a gaping budget deficit the city may have to raise property tax and state tax. The only people who struggle the most from increasing taxes are those who are barely able to pay rent and other expenses, such as utilities bills. One of the reasons why increasing taxes affect individuals is because as property taxes rise the property owner has to spend more, which means his/her profits may be affected, thus increasing the rent of tenants (the most current increase was 4% in one-year leases and 7.25% in two-year leases). In the other hand residents that currently live in homeless shelters have fewer chances of finding an affordable apartment even if he/she obtains a job (Most of the jobs homeless shelters refuges receive are low-paying jobs).
Inclusionary zoning (IZ) is an affordable housing development program, which encourages the production of affordable housing and controls the housing prices. IZ policies in San Francisco, Boston, and Washington D.C support new residential developments to keep a certain percentage of the housing units affordable and serve to low income residents. Density bonuses are allowed to the developer to build more units, and fast-track permitting allows developers to expedite the building process. Although those programs have aided numerous residents, there is the argument followed, IZ program would cause the prices of market-rate housing to rise ultimately reducing rather than increasing affordability. To find out the truth of the IZ program, the research team in Furman Center, New York University addresses these questions.
In 1938, the Fair Labor Standards Act was passed and ever since, the United States has required that all firms that do at least $500,000 worth of business per year pay their workers a minimum wage (“Handy” n.pag.). Because it affects so many workers in so many different aspects of the economy, the minimum wage plays a big part in the cost of labor and how firms deal with those costs. A change in the minimum wage, which would seemingly affect only workers, can actually be felt sometimes all the way down to the consumer, who might end up paying for it in the end—unless the firm finds another way to pay for the mandatory raise for all its workers, such as a decrease in its workforce or a change in the production process. These changes the consumer might not noticeably feel. A change in the minimum wage has several short-term and long-term effects on the economy that can be either beneficial or devastating to society at large.
Compare and contrast the ways in which housing inequalities are discussed from the perspectives of social policy and criminology, and economics (TMA 02)
The minimum wage must be raised because the cost of living has gone up considerably. Education is essential if one wishes to work, and the cost of education has increased drastically in the past twenty years. Companies should be requied to pay workers what they deserve, and that is more than minimum wage is now. With our new technology and the technology in the future work is harder and more complicated. A minimum wage increase would raise the wages of many workers and increase benefits to those disadvantaged workers.
During the Second Industrial Revolution two philosophies combated each other on a global scale. Laissez-Fair economics had ruled for the last few centuries and had created many prosperous nations but abuses of power by wealthy men had turned public opinion against it. Ever since its creation, Socialism begged to be placed head to head with Capitalism and it had finally gotten its chance. Laissez-Fair economics and Socialism both have their pros and cons when implemented in society. The battle between these two ideological works its way throughout society alternating between the protests and debates in the U.S. today to the great terror of the Cold War.
Those who argue in favor of rent control say that it is the only way to protect
Since the mid-1970s, affordable housing has become increasingly difficult to find. This is because Americans are being asked to contribute more and more or their paychecks to their rent and when they become homeless it is difficult to get themselves back into affordable housing. It has been reported that “A full-time worker earning minimum wage cannot afford a one-bedroom unit priced at the Fair Market Rent anywhere in the United States. Nationally a full-time worker must earn $18.32 per hour to afford a two-bedroom apartment at Fair Market Rent.”(National low-income Housing Coalation 2010) Today, our federal minimum wages contributes to our increasing homeless population, while even if you work fulltime making $7.25 isnt even enough to get you off the street. In 1970 there was a...
In President Reagan's own words, homelessness is one problem that we have had, even in the best of times (Reagan). However, economic experts are all in consensus that this is the worse era for the housing market. One...
Gentrification does not follow traditional urban growth theory, which predicts ?the decline of inner city areas as monied classes move to the metropolitan fringe.? The traditional economic model of real estate says that wealthy people can choose their housing from the total city market (Schwirian 96). Once these people decide to live in the suburbs, the lower social classes move into the old homes of the upper class, essentially handing housing down the socioeconomic ladder. Gentrification is actually a reversal of this process. For a variety of reasons, many inner city areas are becoming more attractive to the wealthy, and they are selecting their housing in those areas (Schwirian 96). The problem is that now when the wealthy take over poor homes and renovate them, the poor cannot afford the housing that the wealthy have abandoned. Many researchers have argued whether gentrification has truly created problems in cities. I will analyze the arguments for and against gentrification by exploring the subject from both sides.
result from the withdrawal of the federal government’s investment in affordable housing. It has been noted that
... The Corn Laws lead Malthus to come up with another one of his controversial theories, the Theory of Market Gluts. This theory stated that an excess of supply over demand was regarded as possible, which will eventually lead to unemployment, a glut, and the key force that can prevent such glut lay in the hands of the land owning class. Malthus argued, “There must therefore be a considerable class of persons who have both the will and power to consume more material wealth than they produce, or the mercantile classes could not continue profitability to produce so much more than they consume. In this class the landlords no doubt stand pre-eminent.” (Thomas Malthus, Principles of Political Economy, 2nd edition, 1836) meaning that landlords must spend freely in order for there to be enough demand because they have the money to do so and will lead to lower unemployment. By
Nevertheless, the standard has been reduced to no more than 40% until recently. Such dramatic change of the figure has made the goal become ambiguous. Practically, the government has tried many methods in dealing with the housing problem. Housing code enforcement is a method that tries to regulate minimal conditions for rental housing. However, this method does not seem to work because it brings additional costs to the tenant. On the other hand, the government tries to help people become homeowner by benefits in kind, such as imposing tax exemption on first home down payment and low interest rate on mortgages. However, the method does not really aim at helping the poor. Moreover, the government tries to increase the supply of housing by building new shelters and buying existing apartments. Yet, none of these work efficiently. The reason that building new shelters does not work is because most of these new housing projects are expensive and time consuming.
In states like New York and California there are a lot of cities where rent is controlled at a steady rate to make sure that people living on the poverty line can afford a place to live. Whereas in the downtown New York, the competition is so strong that if there was not rent control, the prices controlled by the market demand would be extremely high. Now this isn’t totally a bad thing, rent control has good and bad qualities that economist has been fighting for over 50 years. In an article about rent control in San Francisco "Karnilowicz estimated that 5 percent of the city’s 212,000 rental units (about 10,600) are kept vacant by landlords who would rather not deal with rent control (others estimate the number is higher, about 25,000 units).” (James 1) Having land owners lose out on revenue, and limit their ability to breakeven/profit in their renting business, is what lead most owners to commit this crime. When it is easier and more profitable to burn their own property down, than to have tenants, there is a major problem in the