Rent Control: Open-and-Shut Case?

[Pacitti, Aaron (CAP, PTL)]

In an urban settings like NYC or SF, the whole rent control issue seems to
be assuming a fairly elastic supply curve for apartments (that is, they can
be built wherever and whenever).  I think that this isn't as true as most
might think.  In reality (as I'm sure any one who lives in or visited NYC or
SF can attest to) there isn't much available land to construct new
apartments...unless of course you build up.  This means that there is a
fairly inelastic supply curve for apartments - the area to build is scarce
and moderately fixed.

The implications become a lot less dramatic when elasticity is factored into
the mix: if rent controls are eliminated then rents are sure to go up, but
since the supply curve is fairly inelastic (extremely steep), then the
resulting new units that could be built would be less than commonly
anticipated.  This is a straight supply and demand curve analysis showing
one equilibrium with controls and one without.  In other words, the
proportion of the increase in rent to the increase in available apartments
would be grater in the non-controlled equilibrium than the controlled
equilibrium. 

Any ECON 101 student should be able to figure out who benefits when these
controls are eliminated.  

Aaron