Business Ethics Case Study: Rent Control By Walter Block

The next case study we read and discussed was Rent Control by Walter Block. The main takeaway of this article is that rent control was meant to have helped housing shortages in New York City, where it was enacted. Rent control puts a maximum price landlords can charge their tenants and this in theory was to help the housing shortage but in reality has contributed to the problem. In a standard situation the tenant and landlord are both self-responsible agents. They are not entitled or obligated to anything. This allows them to negotiate with each other voluntarily to come to an agreement. The agreement is a win-win situation because they both came to a voluntary agreement. This moral situation is called egoism. The role of government in this case is to be hands
Landlords gain at the expense of tenants who usually are poorer and have less bargaining power than the landlord. To solve this problem the government steps in and has a paternalistic role. They protect the tenant from being taken advantage of. This also creates a win-lose situation but this time the tenants win by having lower rent and the landlords lose by making less profits. This moral situation is called altruism. The con argument to rent control is that in the long term, the policy is damaging to all parties. From the landlords perspective by having rent control it reduces their profits. One way to make up for the profits is to cut maintenance on the building. This leads to a lower quality of buildings and more buildings start to wear out and this leads to a slum. Also with lower quality of the building the property value decreases and the tax base for the local area deceases. This leads to bad neighborhood which also becomes a slum. These problems lead to a decrease in the supply. From the tenants perspective the cost decreases and this leads to an increase in demand. This increase in demand and decrease in supply makes the scarcity problem even