> rent control ... exacerbates the underlying housing shortage.
I don't understand this. Shouldn't there always be incentive to build new houses as long as demand exceeds supply?
I don't understand this. Shouldn't there always be incentive to build new houses as long as demand exceeds supply?
If rent was allowed to naturally increase due to an increase in demand, investors would quickly be there to build more appartments. But with rent control, you have little opportunity to offer something unique. It's also harder to compete with appartments that are already close to the center, as they are artifically cheapened.
Of course it's made more complex by additional regulation enforcing you can't build up, more than n stories in most european cities.
(It would presumably mean that the houses that get build would become cheaper to build, i.e. fewer luxury housing with larger margins, but that's not what people are objecting too, rightfully so.)