Rent controls result in a misallocation of resources.

Question

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Rent controls create a distortion in the market by discouraging the production of rental units, resulting in a shortage of supply, which creates a misallocation of resources. Furthermore, rent controls often lead to underinvestment in maintenance and renovations, as landlords cannot increase their rents to pay for these costs. As a result, rental units may deteriorate, create a negative impact on neighborhoods, and lead to various social problems.

Rent Controls Result in a Misallocation of Resources