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Question: Will Uncle Sam Impose Rent Controls?

By Christian Russell

Education & Training with R World Properties, Inc

January 15, 2009 11:04 AM

Just a quick question…in tough economic times, governments often resort to price controls. Nixon did this of course. They cap prices on things like bread and such. During times of massive inflation, as we are in today, governments have been known to cap the rent you can charge to tenants as well. How do you think this would affect real estate values? As our recession progresses, is there any reason to expect caps on real estate rents? Please share your thoughts…

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Chris Rooker

Kline May Realty - Harrisonburg, VA

I think it would be a disaster if the government imposed rent controls. Demand for rentals would increase, and supply would diminish. It would also leave even fewer buyers for the high inventory of homes. Getting out of this mess will be a difficult and painstaking process -- but rent controls will only make it worse.

Jan 15, 2009 11:34 AM

Christian Russell

R World Properties, Inc - West Lafayette, IN

I'm inclined to agree. Historically when it's done, it seems to be presented as a tactic to fight inflation. See, without price controls, prices will skyrocket in a time of significant inflation. The US is doing that now. We've printed trillions of dollars just in the last year. This is what Zimbabwe is doing now, and I have a picture on my computer of a guy paying $150 billion for 3 eggs. So the government steps in and caps the price, to "control" inflation. But price increases are the result of inflation, not the other way around.

When you institute price controls on food, that's when you get bread lines and overall food shortages, because businesses cannot produce a product for the price they're required to sell it for...so they just stop making it. Germany capped rent increases in the 20's. Real estate basically became worthless during that time. Very interesting scenario we find ourselves in today!

Jan 16, 2009 12:18 AM

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Christian Russell

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