Rent control, for example, has been imposed in various cities around the world, with the intention of helping tenants. Almost invariably, landlords and builders of housing find the reduced range of terms less acceptable and therefore supply less housing. In Egypt, for example, rent control was imposed in 1960. An Egyptian woman who lived through that era and wrote about it in 2006 reported: The end result was that people stopped investing in apartment buildings, and a huge shortage in rentals and housing forced many Egyptians to live in horrible conditions with several families sharing one small apartment. The effects of the harsh rent control is still felt today in Egypt. Mistakes like that can last for generations.
Egypt was not unique. The imposition of rent control has been followed by housing shortages in New York, Hong Kong, Stockholm, Melbourne, Hanoi and innumerable other cities around the world.* The immediate effect of rents set below where they would be set by supply and demand is that more people seek to rent apartments for themselves, now that apartments are cheaper. But, without any more apartments being built, this means that many people cannot find vacant apartments. Moreover, long before existing buildings wear out, auxiliary services like maintenance and repair decline, since a housing shortage means that landlords are no longer under the same competitive pressures to spend money on such things to attract tenants, when there are more applicants than apartments during a housing shortage. Such neglect of maintenance and repair makes buildings wear out faster. Meanwhile, the lower rate of return on investments in new apartment buildings, because of rent control, cause fewer of them to be built. Where rent control laws are especially stringent, no new apartment buildings at all may be built to replace those that are wearing out. Not a single apartment building was built in Melbourne for years after World War II because of rent control laws. In a number of Massachusetts communities, no rental housing was built for a quarter of a century, until the state banned local rent control laws, after which building resumed. --Tom Sowell