Presentation Questions Flashcards
(127 cards)
1
Q
Why hasn’t supply increased in response to higher prices?
A
Housing supply is price inelastic in the short run due to planning constraints, limited land availability, and lengthy development processes. Local opposition and risk-averse developers also play a role.
2
Q
How would you quantify the effect of interest rates on rents?
A
Higher interest rates increase landlord mortgage costs, which are often passed on as higher rents. A regression model controlling for other factors would be needed for precise isolation.
3
Q
Would rent controls reduce inequality?
A
Possibly in the short term. However, over time, they can reduce supply and quality, harming new renters, and may benefit wealthier tenants, increasing inequality.
4
Q
What is an example of successful rent controls?
A
Germany uses rent stabilisation, allowing modest increases tied to inflation, combined with strong tenant rights and large-scale rental supply.
5
Q
Why not just increase housing benefit instead of rent controls?
A
Housing benefit aids affordability but can increase demand without addressing supply, pushing prices up unless supply expands.
6
Q
What is rent stabilisation?
A
Rent stabilisation sets rules for how much rent can rise within a tenancy, usually linked to inflation, avoiding some distortions compared to a fixed rent ceiling.
7
Q
What happens if the queue for bread gets longer and longer?
A
This illustrates excess demand. Holding price below market level leads to shortages, making access inefficient and dependent on luck.
8
Q
Is there evidence that relaxing planning laws would lead to lower rents?
A
Not conclusive, but flexible planning tends to see greater supply responsiveness, stabilising prices according to economic theory.
9
Q
Why are rent controls popular politically?
A
Benefits are immediate and visible for tenants during crises, while downsides emerge slowly, making careful policy design crucial.
10
Q
What would a preferred policy package look like?
A
A mix of CPI-linked rent stabilisation, increased investment in social housing, planning reform, and better-targeted income support for renters.
11
Q
How would you know if rent controls were working?
A
Look at changes in rent levels, supply indicators, tenant outcomes, and monitor for unintended effects like landlords exiting the market.
12
Q
Would rent controls affect labour mobility?
A
Yes, tenants locked into low rents may be less willing to move for better job matches, creating inefficiencies in the labour market.
13
Q
What’s the risk of rent ceilings worsening inequality?
A
They may benefit middle-income groups while locking out those in greatest need, creating distributional issues.
14
Q
What’s the economic rationale for housing subsidies instead of rent caps?
A
Subsidies preserve price signals and can be targeted efficiently, but if supply is inelastic, they can push up prices without supply-side reforms.
15
Q
What kind of supply-side reforms would help most?
A
Planning reform, funding for social housing, and build-to-rent schemes with institutional investors can increase stable supply.
16
Q
Why are rents rising faster than house prices in some areas?
A
Rents reflect short-term living demand, while house prices reflect long-term demand. High migration can spike rental demand without supply increases.
17
Q
Could rent ceilings be used during a crisis only?
A
Yes, they can act as temporary stabilisers, but must be time-limited and accompanied by a clear exit plan to avoid long-term market harm.
18
Q
What’s the role of expectations in the rental market?
A
Expectations affect both demand and supply decisions. If tenants expect rising rents, they may stay put; if landlords expect controls, they may stop investing.
19
Q
What’s the economic justification for government intervention in housing?
A
Housing is a merit good with positive spillovers, and market failures justify intervention, especially for lower-income households.
20
Q
If not rent controls, what would be your preferred policy mix?
A
Combine moderate rent stabilisation with strong supply-side measures like investment in affordable housing and targeted subsidies for low-income renters.
21
Q
If interest rates rise further, how might that affect rental prices?
A
Higher borrowing costs for landlords may lead to higher rents, while increasing rental demand as buying becomes less affordable.
22
Q
If housebuilding suddenly increases, what’s the likely impact on rents?
A
Increased housing supply would shift the supply curve outward, putting downward pressure on rents over time.
23
Q
What might happen to rental property quality with strict rent controls?
A
Landlords may underinvest in maintenance, leading to deterioration in housing standards over time.
24
Q
What happens if landlords expect rent controls to continue long term?
A
They may exit the market or shift to short-term lets, reducing rental supply and increasing pressure on remaining stock.
25
If wages stagnate but rents continue to rise, what is the broader economic risk?
Worsening affordability could lead to housing stress, reduced disposable income, and rising inequality.
26
If housing benefit were increased, what effect might it have on rents?
Inelastic supply may lead to higher rents as landlords capture the benefit, highlighting the need for supply reform.
27
If net migration falls sharply, how would that affect the rental market?
Lower migration could reduce demand, stabilising or slightly reducing rents, but supply constraints may limit the impact.
28
What happens if tenants are protected from rent increases but new lets are uncapped?
This creates dual markets, benefiting sitting tenants while landlords may raise rents sharply between tenancies.
29
If developers are given tax breaks to build rental housing, what’s the expected outcome?
Lower construction costs would improve profitability of new developments, increasing supply and potentially relieving rent pressure.
30
If a rent ceiling is set too close to market rent, what’s the likely effect?
If non-binding, distortions are limited, but continued inflation may lead to binding ceilings and emerging shortages.
31
What would happen if planning laws were suddenly relaxed?
It would lower costs and increase development speed, shifting the supply curve outward and easing pressure on rents.
32
How does inelastic supply affect rent volatility?
Inelastic supply means small demand increases can cause large price increases, explaining rent spikes in high-demand areas.
33
Why has housing supply not responded to rising rents?
Barriers include land-use restrictions, planning delays, lack of incentives, and local resistance, creating development disincentives.
34
Why do rising rents disproportionately affect low-income households?
They spend a larger share of their income on housing, increasing risks of deprivation and inequality.
35
What is the link between housing affordability and productivity?
High housing costs reduce geographical mobility, lowering overall economic efficiency.
36
How does the housing market affect intergenerational inequality?
Older generations benefit from capital gains, while younger people face high rents and ownership barriers, widening wealth gaps.
37
If we introduce rent controls, what would you watch for to assess their impact?
Monitor rental property supply, tenant turnover, housing quality, investment levels, and who benefits.
38
Could rent ceilings ever reduce inequality?
Possibly if well-targeted, but without supply measures, they may create shortages or benefit better-off tenants.
39
What is a more effective alternative to rent control?
Increase supply through social housing and planning reform, or use means-tested subsidies or CPI-linked rent stabilisation.
40
Is rent control always bad policy?
Not necessarily; the impact depends on design. Rigid freezes are harmful, but CPI-linked increases can protect tenants.
41
What assumptions are you making in your analysis?
Markets are competitive, demand is strong, supply is constrained, landlords are profit-maximising, and rent controls are binding.
42
How would you explain the concept of rent control to a non-economist?
It’s like capping the price of something essential to protect people from sudden increases, but can lead to shortages if too low.
43
If housing benefit were expanded significantly, what are the risks?
It may push up rents unless supply increases, as landlords could raise prices knowing government will cover costs.
44
How do you know this is a case of market failure?
The market isn’t delivering sufficient affordable housing, justifying intervention due to information asymmetries and merit good arguments.
45
If productivity rose sharply across the economy, how could that affect the rental market?
Higher incomes could increase housing demand, pushing rents up further.
46
What are the risks of significantly expanding housing benefit?
It may push up rents unless supply also increases. Landlords could raise prices knowing the government will cover the cost, limiting the policy’s impact.
## Footnote
Considerations of market dynamics and the relationship between supply and demand are critical in this context.
47
How do we know this is a case of market failure?
The market isn’t delivering sufficient affordable housing, especially for lower-income groups. Justifications include:
* Information asymmetry
* Merit good arguments
* Externalities
## Footnote
These factors highlight the need for intervention in the housing market.
48
If productivity rose sharply across the economy, how could that affect the rental market?
Higher incomes could increase demand for housing, pushing up rents unless supply expands. It could also improve affordability, depending on distribution.
## Footnote
The relationship between productivity and housing demand is complex.
49
What happens if we increase social housing supply but demand still outstrips it?
Prices may still rise in the private sector. Social housing might reduce pressure on the bottom end of the market, but spillover effects or quality differences could leave gaps elsewhere.
## Footnote
Understanding the balance between supply and demand is essential for effective housing policy.
50
Why might landlords choose to leave the rental market even without rent controls?
Rising interest rates, changing tax rules, or regulatory burdens can reduce profit margins. If yields fall below acceptable levels, landlords may sell or switch to short-term lets.
## Footnote
The financial viability of rental properties is influenced by broader economic factors.
51
What’s the difference between housing being a merit good and a basic need?
A basic need is essential for survival or welfare (e.g. shelter). A merit good is undervalued or under-consumed without state intervention due to information failures or externalities.
## Footnote
Housing can fit both categories, emphasizing its importance in policy discussions.
52
Is the rental market perfectly competitive? Why does this matter?
No. Barriers to entry, local monopolies, and information asymmetry distort outcomes. This matters because standard supply-demand analysis assumes competitive markets.
## Footnote
The characteristics of market structure significantly influence rental prices.
53
What role does speculative investment play in the housing market?
It can inflate prices without increasing supply, particularly in areas where housing is bought as an asset rather than to live in, fueling volatility and decoupling rents from fundamentals.
## Footnote
Speculative investments can lead to significant market distortions.
54
If interest rates were cut sharply tomorrow, how would that affect the rental market?
Could reduce landlord costs and ease rent pressure, but may boost housing demand and investment demand, pushing up prices and worsening affordability.
## Footnote
The relationship between interest rates and the rental market is multifaceted.
55
Is rent inflation always bad?
Not necessarily. It may reflect rising quality or income growth, but when it outpaces wages and worsens inequality, it becomes a concern. The key issue is affordability, not prices in isolation.
## Footnote
Understanding the context of rent inflation is crucial for evaluating its impact.
56
Should rent controls vary regionally?
Possibly. Housing pressures differ across the UK. A one-size-fits-all policy may be inefficient; regional targeting could improve effectiveness but adds complexity.
## Footnote
Regional characteristics can significantly influence housing policy effectiveness.
57
What types of government intervention could help ease the rental crisis?
Consider:
* Direct investment in affordable housing
* Tax incentives for landlords
* Housing benefit reforms
* Planning deregulation
* Support for build-to-rent schemes
## Footnote
A combination of demand- and supply-side policies is often more effective.
58
Could rent controls increase inequality between renters?
Yes. Existing tenants may benefit, but new entrants may face shortages or higher rents in unregulated parts of the market, creating a two-tier system.
## Footnote
This highlights the potential unintended consequences of rent control policies.
59
Why haven’t past governments solved the housing supply issue?
Political resistance to development (NIMBYism), local planning constraints, limited fiscal space, and long gestation periods for housing projects make it difficult to tackle quickly.
## Footnote
Understanding these barriers is key to addressing housing supply challenges.
60
Is rental housing a public good?
No. It’s rivalrous and excludable, but it may have positive externalities and merit good characteristics that justify public intervention.
## Footnote
The classification of rental housing is important for policy formulation.
61
How elastic is the supply of rental housing in the UK?
Highly inelastic in the short term due to planning delays and fixed capital. More elastic in the long run, though still constrained by regulation and land availability.
## Footnote
Elasticity affects how supply responds to demand changes.
62
Could rent controls improve allocative efficiency?
Possibly, if they correct for market failures like monopoly pricing or information asymmetries. Generally, they create allocative inefficiencies if poorly designed.
## Footnote
The design of rent control policies is critical to their effectiveness.
63
What might behavioral economics say about rent control?
People may have loss aversion—strongly reacting to rising rents—which can drive demand for intervention. Bounded rationality means tenants may not search optimally in a complex market.
## Footnote
Behavioral factors can significantly influence housing decisions.
64
Who benefits most from rent controls? Who loses out?
Sitting tenants in high-demand areas gain from lower rents and stability. New renters, landlords, and those outside the system may lose out through reduced access or higher market rents.
## Footnote
The impact of rent control varies among different stakeholder groups.
65
What are the unintended consequences of focusing only on rent affordability?
Ignoring supply could worsen shortages. Neglecting housing quality or location could lead to poorly functioning urban areas. Fiscal costs may rise if housing benefit increases to plug gaps.
## Footnote
A holistic approach to housing policy is necessary.
66
How can we ensure housing policy supports long-term economic growth?
By aligning it with productivity goals:
* Improving labour mobility
* Reducing spatial inequality
* Ensuring access to affordable housing near employment centres
* Encouraging efficient land use
## Footnote
Long-term strategies must consider economic growth and housing needs.
67
What would happen if interest rates fell sharply next year?
Cheaper borrowing could encourage more investment in rental housing, easing supply pressures slightly but could also fuel house price inflation, making ownership harder and keeping rental demand high.
## Footnote
The interaction between interest rates and housing supply is complex.
68
Imagine rent controls are introduced but supply continues to fall. What should the government do?
Consider complementary policies like tax incentives for landlords, subsidies for new construction, and targeted benefits to renters. Evaluate whether controls are distorting incentives too heavily.
## Footnote
A multi-faceted approach is critical in addressing housing challenges.
69
What if the government removed housing benefit entirely—what would be the effect?
Demand among low-income households would fall, possibly pushing down rents at the bottom end, but also increasing homelessness and inequality. Social costs could outweigh any efficiency gain.
## Footnote
The implications of housing benefit removal can be severe.
70
If you could only recommend one intervention to address high rents, what would it be?
A supply-side solution (e.g. planning reform or public housing investment) as the most durable and economically efficient approach, while acknowledging short-term political resistance.
## Footnote
Supply-side interventions are often more sustainable in the long run.
71
Which is more efficient to help renters—housing benefit or rent controls?
Benefits preserve price signals and avoid shortages but can push up rents if supply is fixed. Controls protect tenants directly but can lead to inefficiencies and reduced quality.
## Footnote
The choice between these two approaches depends on the specific market context.
72
How do regional housing markets complicate national policy design?
Differences in demand, income, and supply elasticity mean that a one-size-fits-all policy may undercorrect in London and overcorrect in rural areas. Spatial targeting may be needed.
## Footnote
Understanding regional variations is key to effective policy formulation.
73
What are the equity vs efficiency trade-offs in rent control?
Controls improve equity for some renters but reduce efficiency by misallocating resources, discouraging mobility, and distorting supply decisions.
## Footnote
Balancing equity and efficiency is a central challenge in housing policy.
74
What role does public perception play in housing policy?
Perceptions of fairness, security, and market failure can drive public support for controls even if economists are sceptical. Politicians may act on these pressures regardless of long-term efficiency concerns.
## Footnote
Public sentiment can significantly influence housing policy decisions.
75
How does housing supply elasticity affect the effectiveness of rent control?
If supply is very inelastic, rent control won’t worsen shortages much; but if there’s any scope for supply response, controls might choke it off, especially if investor confidence is shaken.
## Footnote
The responsiveness of supply is crucial in evaluating rent control impacts.
76
How might rent control affect labour mobility?
If tenants stay in rent-controlled flats longer than needed, it may reduce geographic mobility, distorting local labour markets and leading to inefficiencies in job matching and productivity.
## Footnote
Mobility is vital for efficient labor markets, and rent controls can inhibit it.
77
How do rent controls interact with housing quality and maintenance incentives?
Lower rental income reduces landlords’ willingness to invest in upkeep. Without separate quality regulation or incentives, rent controls may lead to long-run deterioration in housing stock.
## Footnote
Ensuring housing quality is a critical aspect of effective rental policy.
78
Is high rent always a sign of market failure?
Not necessarily—high rents can reflect high value or scarce supply. But when persistent and unaffordable, especially for essentials like housing, it may indicate policy failure or systemic barriers to supply.
## Footnote
The context of high rents is essential when evaluating market conditions.
79
How would you design a rent control policy to minimise distortions?
Cap increases within tenancies, not between them; allow inflation-linked adjustments; exempt new builds to maintain investment. Pair with measures to expand supply and protect vulnerable renters.
## Footnote
Policy design is crucial to minimize negative impacts.
80
Why not just build more housing and avoid controls altogether?
Building takes time, faces political resistance, and doesn’t help those suffering now. Some advocate temporary controls or subsidies as stopgaps.
## Footnote
Immediate solutions are often required in housing crises.
81
What if landlords started converting homes to Airbnbs in response to rent caps?
It would shrink long-term rental supply. You’d need policy coordination—restrict short-term lets, offer tax relief for long-term renting, or reform landlord incentives.
## Footnote
The impact of short-term rentals on the housing market is a significant concern.
82
Could rent controls be combined with zoning reform?
Yes. Zoning reform boosts supply, offsetting some distortions of controls. A joined-up strategy makes rent controls more politically palatable while aiming for long-term structural improvement.
## Footnote
Coordinated policy approaches can enhance effectiveness.
83
How do behavioral factors affect housing decisions under rent control?
Tenants may anchor to low rents and avoid moving even if it’s inefficient. Landlords may overreact to risk, influenced by loss aversion or status quo bias.
## Footnote
Behavioral economics provides insight into decision-making in housing.
84
Define supply is price inelastic
The amount of housing available doesn’t increase much when prices rise. It takes a long time to build houses.
85
Define equilibrium rent
The rent level where the amount of housing people want to rent equals the amount landlords are willing to offer.
86
Define housing affordability
How easily people can pay for housing relative to their income. If rents rise faster than wages, housing becomes less affordable.
87
Define CPI inflation
CPI stands for Consumer Price Index — a measure of the average change in prices for goods and services bought by households.
88
Define rent-to-income ratio
A measure of how much of a household’s income is spent on rent. A high ratio means housing takes up a big share of income.
89
Define rent ceiling
A legal limit on how much landlords can charge for rent, set below the market level to make housing more affordable.
90
Define binding price ceiling
A cap that is lower than the market rent, which affects behavior because landlords can’t charge what they normally would.
91
Define excess demand
When more people want to rent housing than there are properties available at the capped price. This can lead to shortages.
92
Define allocative efficiency
A situation where resources (like housing) are used in a way that best matches people’s needs and wants.
93
Define CPI-linked rent stabilisation
A policy that limits how much rents can rise, often by tying increases to the rate of inflation.
94
Define landlord investment incentives
Factors that make landlords want to build or maintain rental properties. If profits fall, they may stop investing.
95
Define build-to-rent
A type of housing development designed specifically for renting rather than for sale, often by large-scale institutional investors.
96
Define merit good
A good that society believes should be available to everyone because it has wider benefits, like better health or stability.
97
Define market failure
When the free market doesn’t produce outcomes that are best for society — for example, not enough affordable housing being built.
98
Define demand-side support
Government policies that help people afford housing, such as housing benefit. They increase people’s ability to pay.
99
Define supply-side reform
Policies aimed at increasing the number of homes available, such as loosening planning rules or funding construction.
100
Define two-tier system
A system where some people (e.g. tenants with rent control) get better deals than others (e.g. new renters).
101
Define short-term lets
Renting properties for a few days or weeks at a time — for example, through Airbnb — instead of long-term leases.
102
Define dual market
A situation where different groups of renters face different conditions — for example, sitting tenants with rent caps and new tenants without.
103
Define housing stock deterioration
The decline in quality of housing over time, especially if landlords don’t maintain properties due to lower returns.
104
Define subsidy-incidence problem
When a government benefit (like housing subsidy) ends up helping landlords rather than tenants, because rents rise to absorb the extra money.
105
Define elasticity
How much one thing changes in response to another — for example, how much housing supply changes when prices go up.
106
Define inflation-linked adjustment
A rule that lets rent or income rise each year by the rate of inflation, keeping purchasing power the same.
107
Define time-limited policy
A rule or policy that is only meant to last for a short period, often during a crisis, and then be phased out.
108
Define marginal revenue
The extra income a landlord earns from renting out one more unit or raising rent.
109
Define spatial inequality
Differences in income, opportunities, or quality of life depending on where you live.
110
Define positive spillovers
Benefits that go beyond the person paying for something — for example, good housing can improve health and community outcomes.
111
Define bounded rationality
The idea that people don’t always make perfectly informed decisions because of time, information, or cognitive limits.
112
Define loss aversion
A concept where people fear losses more than they value gains — for example, fearing rent hikes more than appreciating rent cuts.
113
Define status quo bias
People’s tendency to stick with what they have, even if moving would be better.
114
Define deadweight loss
A loss of economic efficiency when demand and supply are out of balance.
115
Define intergenerational inequality
Differences in wealth or opportunity between age groups — for example, older people owning homes while younger ones face high rents.
116
Define labour mobility
How easily people can move to where jobs are. High rents in some areas can reduce this.
117
Define job matching efficiency
How well the labour market connects workers to the jobs that best suit them.
118
Define regulatory burden
The cost or difficulty of complying with government rules for landlords.
119
Define information asymmetry
When one side in a transaction knows more than the other. In housing, landlords often know more than tenants.
120
Define competitive market
A market where many buyers and sellers operate freely and no one has much power.
121
Define housing stress
When people struggle to afford decent housing — usually defined as spending more than 30–40% of income on rent.
122
Define policy credibility
How believable or trustworthy a policy is seen to be.
123
Define market power
When landlords can charge high prices due to lack of competition.
124
Define rationing by queueing
When prices are held down, people “pay” in time instead of money.
125
Define subsidy targeting
Designing benefits so that only those who need them get them.
126
Define externality
A side effect of an economic activity that affects others.
127
Define crowding out
When government involvement discourages private investment.
