Who Knows What Inefficiencies Lurk in the Hearts of Rent Controlled Housing Markets? The Shadow Market Knows!

Imagine that you've just graduated from college and have been offered a position with a firm in New York City. You can't wait to start living in your own apartment. Your Aunt Bernice, who lives in Brooklyn Heights, has offered you a place to stay while you look for a place to begin living on your own.

In this lesson you will plot a data series onto a bar chart, and then read and interpret information from a bar chart. You will also predict how absence or presence of rent-controlled units impacts the cost of non-regulated housing, identify shadow markets, predict how owners of non-regulated housing will vote on rent-control referendums, and describe effects of price ceilings.

It's Sunday morning, and Aunt Bernice offers you the obituaries section of the Times. "Here!" she says. "This is the best place to start searching for an apartment."

"Excuse me, Aunt Bernice. I think you meant to hand me the classifieds section."

"No. The quantity of rent-controlled apartments people demand these days is much higher than the quantity currently available. There is a shortage. Since landlords aren't able ration out their supply of rental units by adjusting rates above a certain price, units are rationed on a first-come, first-served basis. In some instances, you must pay an additional fee for the privilege of renting. I suggest you start reading through the obituaries and make a list of newly vacated apartments… before the apartments are listed with an agency or in the newspaper."

Hearing Aunt Bernice's good advice, you're reminded of the day your professor in your Economics 101 course discussed Price Ceilings.

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