Final answer:
Rent controls can lead to a shortage of housing units for low-income families, as landlords might find it less profitable to maintain their rentals, leading to a reduction in the supply. This exacerbates housing issues rather than alleviating them, as the quantity of available rental housing on the market decreases due to decreased incentives for landlords.
Step-by-step explanation:
Imposing rent controls in a city can lead to a shortage of housing units available to low-income families. This outcome occurs because rent control is a type of price ceiling that keeps rents below what the market would typically dictate, often with the intention of making housing more affordable. However, when rents are artificially lowered, landlords may find it less profitable to rent out their units, leading to fewer rental units being available on the market.
As a direct consequence of rent controls, landlords may choose to convert rental units to condos, sell them, or repurpose the property for non-residential use. This reduction in the supply of rental units actually makes it harder for low-income families to find housing, despite the intention of making housing more affordable. In addition, the reduced rental supply can lead to an increase in rent for available units that are not subject to rent control, due to increased competition for these units.
The economic principle behind this is that when price controls like rent control are enacted, the quantity supplied of rental housing decreases, as suppliers (landlords) are disincentivized to offer their property for rent. The result is a mismatch between supply and demand, with potentially harmful effects for both landlords and renters. Urban areas such as New York and San Francisco have historically shown the impacts of rent control policies on housing markets.