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Should the US Government act to reduce Home Rental Prices?

The GFC of 2008 and consequent recession has led to a vast number of foreclosures across the nation as homeowners have found themselves unable to pay their mortgages.

The solution for those now unable to afford their 'dream home' is to enter the home rental market. Predictability this trend has created a situation where rental prices are becoming prohibitive, particularly for those on low incomes. Looking more closely at the rising rental prices in America today the question has to be asked as to whether the US Government needs to act to reduce these prices.

California Home Rental Market Boom

Interestingly, the rental land rush has particularly affected the rental market in California where experts believe the market may be in danger of overheating. In other cities local Governments have been legislating to restrict the number of rentals in order to protect land values. While this may be good for homeowners it has the effect of forcing existing rental prices higher. Obviously this places an even greater burden on those wanting to rent. This policy also ignores the fact that now many of these people looking to rent are older than traditional tenants and therefore can be expected to take more pride in their home and property than younger tenants sometimes do. Naturally, a neat neighborhood can be expected to help sustain land values so it is fair to consider that these fears may, in fact, be unfounded.

People who rent homes are more flexible

A recent article in the Economist pointed out a significant benefit of balanced or a high level of rentals as opposed to home ownership. This is due to the fact that people who rent are more mobile. When certain parts of the economy including many cities and towns are losing lots of jobs, new or existing jobs can only be taken by those who are willing and able to move. People who rent are much more flexible because they are only tied to their property for the term of their current lease.

Less burden on federal rent assistance

It’s clear that if people are in work and able to pay affordable rents there is less of a burden on the federal rent assistance budget, unemployment goes down and there is less household debt. Whilst loan companies and corporations such as Citifinancial show reasonable profits for 2011 wouldn’t it be great if the American people could survive comfortably without having to take out a loan in order to pay an exorbitant deposit for rent or to supplement rent payments, further adding to their debt. And taking out a loan nowadays, in an unstable economy, can lead to bad credit if people are unable to make the payments.

home rent sign in USA

Good reasons for US Government action

Clearly then, there are good reasons for the US Government to act to reduce rental costs. This can be done through building more houses, something which creates growth in the building industry, and repealing local laws that place limits on the number of available rental properties. Of course, the concerns of homeowners cannot be dismissed out of hand so any regulations should reflect their beliefs and the needs of the local economy, particularly if people in the rental market can contribute in a meaningful way to the economy.


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