If a local government enacts rent control legislation that sets the price of rental housing below equilibrium, which of the following will most likely happen in the local rental housing market?
A) Discrimination in the rental housing market will be less likely.
B) The quality of rental housing will improve.
C) A surplus of rental housing will develop.
D) A shortage of rental housing will develop.

Question

Quizplus · Accepted Answer

When the price of rental housing is set below equilibrium, there will be an excess demand for rental housing. Landlords will be incentivized to exit the market, reduce maintenance or quality, or convert their properties to other uses. In contrast, tenants will be incentivized to demand more rental housing, which will increase the quantity demanded. This creates a mismatch between the supply and demand of rental housing, meaning that there will be a shortage of rental housing.

If a Local Government Enacts Rent Control Legislation That Sets