Local authorities in some european cities

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After World War II local authorities in some European cities (Berlin and Frankfurt, for instance) prescribed ceilings on rental prices for city flats. The idea was to make access to appropriate dwelling space largely independent of income. Although the measures served the purpose for a while, very soon negative side-effects did appear; in particular, black markets for flats developed, and, in the longer run, inner cities' residential houses got dilapidated. Use economic theory to explain the situation and the consequences that arose. Hint: Consider the incentives of landlords, rental agencies and flat-hunters.

Reference no: EM13946227

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