One Consequence Of The Rent-Control Act
The government will be spending Rs 2500 crores (apprx. US$ 5.4 billion US$ 540 million) of taxpayers’ money — our money — into breaking down dilapidated buildings in Mumbai and building new ones in their place. So why is the rent-control act to blame? Well, consider why the owners of these buildings have no incentive to keep them in good shape in the first place, and why they cannot derive enough value from their property to maintain it properly.
And also consider that because there are more tenants than landlords, by far, it will not be politically possible anytime soon to repeal the act.
And also consider the many alternative uses for this money.
Update: For more on rent control in general, and why it is so destructive, do read Walter Block’s essay on the subject.
The amount should be $540 mn not $5.4 bn as mentoned
Comment by Manoj — December 8, 2005 @ 2:22 pm
Thanks Manoj, my mistake. Changing now.
Comment by Amit Varma — December 8, 2005 @ 2:58 pm
While I don’t favor rent control (it surely doesn’t make slums less likely), I think San Francisco and New York have some kind of rent control. Surely Mumbai buildings are more dilapidated then buildings in those two cities. I wonder how the controls work in these cities?
Comment by Chandra Dulam — December 8, 2005 @ 11:38 pm
Chandra,
Very badly. New York has the same problems that Mumbai has. I don’t know about SFO, but from what I know of rent control in the US, the cities that have them have housing shortages and crumbling infrastructure. The correlation is quite strong.
Comment by Ravikiran Rao — December 9, 2005 @ 10:39 am