Rent controls are a policy favoured by many governments, including those of the Arabian Gulf countries, with the goal of helping low-income families access affordable housing.
In our last article, we explained why rent controls create housing shortages and diminish housing quality. In this article, we dig deeper into the damage caused by rent controls, highlighting how they waste tenants’ valuable time and resources.
If rent controls create shortages, how is the shortage resolved? Who gets lucky and who does not?
When price controls are implemented in their strictest, purest form, consumers enter a rationing queue, such as waiting for a place in a prestigious school. The queue creates a war of attrition — those who are willing to wait longest are most likely to get served. Some people give up immediately and go without; other, less fortunate people enter the queue but quit after a considerable waiting time, once they realise that they do not possesses the patience of others, or perhaps because they have more important demands upon their time. If you visit any country with rent controls, you are likely to witness significant waiting lists on housing units, possibly mediated by the government to ensure a transparent and fair process.
In essence, therefore, consumers go from paying for a good purely financially in a regular market without price controls, to paying for a good using a combination of money and time in a market with price controls.
This hybrid payment alternative does present a key potential advantage, which is that it may result in a more egalitarian distribution of housing. In certain situations, low-income households may be systematically richer than high-income households in their ability to wait in line, somewhat compensating for their financial disadvantage.
However, queuing to resolve a shortage suffers from a fundamental disadvantage compared to purely financial payments, which is that the waiting time constitutes resources permanently lost by society. In contrast, under purely financial payments, when buyers bid prices up, a buyer's loss transforms into a seller's benefit.
To illustrate this more clearly, consider the following example. Sabah owns an apartment and has two potential tenants, Sabika (rich); and Yusuf (poor). Sabika is willing to rent at up to Dh100,000 a month, while Yusuf is willing to rent at up to Dh20,000 a month. In the absence of rent controls, the market rent will rise until it exceeds Dh20,000, forcing Yusuf out of the market, limiting his housing options as a direct result of his limited wealth.
To assist Yusuf secure housing, the government imposes a rent ceiling of Dh10,000. Sabah creates a virtual queue to decide who gets the apartment between Sabika and Yusuf. After three months, Sabika — who is less patient — gives up, and Yusuf rents the apartment.
Without rent controls, every dirham that Sabika paid directly benefited Sabah, meaning that there was no wastage. However, under rent controls, the three months of waiting time expended by Sabika and Yusuf did not benefit Sabah. Therefore, at the societal level, the price of ensuring that the poorer person had a chance of securing housing was everybody waiting three months.
This process of frittering away the benefits of a market exchange by having people engage in wasteful ways of resolving shortages is known as “rent dissipation”. The gains from trade are eroded to nobody’s benefit, just like the loss of speed from friction or air resistance. In Communist countries, rent dissipation was not merely time-based - people queuing for basic commodities endured the physical discomfort of waiting in adverse weather conditions, enduring boredom and being away from their families.
Wasteful queues are not the only ways to resolve shortages, however, and alternatives exist that involve no rent dissipation, such as lotteries. Sabah could have instantly drawn lots, saving Sabika and Yusuf three months of waiting.
Yet in practice, for a variety of reasons, lotteries are either not used, or are abused. In all countries with rent controls, there is a grave risk of corruption in the allocation process — people will pay overt or covert bribes to jump ahead in the queue, or to get a “lucky” draw in the lottery. Alternatively, those who are politically connected might be better placed to take advantage of the system.
Unfortunately, most of these abuses typically hurt low-income households the most, since they have the smallest ability to pay bribes or secure favours from those in charge of housing allocation decisions. Thus, under certain conditions, low-income households, who are often the purported beneficiary of rent controls, end up suffering the triple whammy of facing a housing shortage, being cheated by corruption in the rationing queue and enduring lower quality housing when they do eventually secure a unit.
Despite these grave risks, why do governments and people still laud rent controls? And is there a more effective alternative? We discuss these issues in our next article.
We welcome economics questions from our readers via email at omar@omar.ec or through Twitter at (@omareconomics).
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
At a glance
Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.
Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year
Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month
Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30
Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse
Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth
Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances
UPI facts
More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions
THE BIO
Ms Al Ameri likes the variety of her job, and the daily environmental challenges she is presented with.
Regular contact with wildlife is the most appealing part of her role at the Environment Agency Abu Dhabi.
She loves to explore new destinations and lives by her motto of being a voice in the world, and not an echo.
She is the youngest of three children, and has a brother and sister.
Her favourite book, Moby Dick by Herman Melville helped inspire her towards a career exploring the natural world.
Company%20Profile
%3Cp%3ECompany%20name%3A%20EduPloyment%3Cbr%3EDate%20started%3A%20March%202020%3Cbr%3ECo-Founders%3A%20Mazen%20Omair%20and%20Rana%20Batterjee%3Cbr%3EBase%3A%20Dubai%2C%20UAE%3Cbr%3ESector%3A%20Recruitment%3Cbr%3ESize%3A%2030%20employees%3Cbr%3EInvestment%20stage%3A%20Pre-Seed%3Cbr%3EInvestors%3A%20Angel%20investors%20(investment%20amount%20undisclosed)%3C%2Fp%3E%0A
The burning issue
The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE.
Read part four: an affection for classic cars lives on
Read part three: the age of the electric vehicle begins
Read part one: how cars came to the UAE
Killing of Qassem Suleimani
Killing of Qassem Suleimani
Killing of Qassem Suleimani
The specs
AT4 Ultimate, as tested
Engine: 6.2-litre V8
Power: 420hp
Torque: 623Nm
Transmission: 10-speed automatic
Price: From Dh330,800 (Elevation: Dh236,400; AT4: Dh286,800; Denali: Dh345,800)
On sale: Now
Specs
Engine: Electric motor generating 54.2kWh (Cooper SE and Aceman SE), 64.6kW (Countryman All4 SE)
Power: 218hp (Cooper and Aceman), 313hp (Countryman)
Torque: 330Nm (Cooper and Aceman), 494Nm (Countryman)
On sale: Now
Price: From Dh158,000 (Cooper), Dh168,000 (Aceman), Dh190,000 (Countryman)
Election pledges on migration
CDU: "Now is the time to control the German borders and enforce strict border rejections"
SPD: "Border closures and blanket rejections at internal borders contradict the spirit of a common area of freedom"
Manchester United's summer dealings
In
Victor Lindelof (Benfica) £30.7 million
Romelu Lukaku (Everton) £75 million
Nemanja Matic (Chelsea) £40 million
Out
Zlatan Ibrahimovic Released
Wayne Rooney (Everton) Free transfer
Adnan Januzaj (Real Sociedad) £9.8 million
The smuggler
Eldarir had arrived at JFK in January 2020 with three suitcases, containing goods he valued at $300, when he was directed to a search area.
Officers found 41 gold artefacts among the bags, including amulets from a funerary set which prepared the deceased for the afterlife.
Also found was a cartouche of a Ptolemaic king on a relief that was originally part of a royal building or temple.
The largest single group of items found in Eldarir’s cases were 400 shabtis, or figurines.
Khouli conviction
Khouli smuggled items into the US by making false declarations to customs about the country of origin and value of the items.
According to Immigration and Customs Enforcement, he provided “false provenances which stated that [two] Egyptian antiquities were part of a collection assembled by Khouli's father in Israel in the 1960s” when in fact “Khouli acquired the Egyptian antiquities from other dealers”.
He was sentenced to one year of probation, six months of home confinement and 200 hours of community service in 2012 after admitting buying and smuggling Egyptian antiquities, including coffins, funerary boats and limestone figures.
For sale
A number of other items said to come from the collection of Ezeldeen Taha Eldarir are currently or recently for sale.
Their provenance is described in near identical terms as the British Museum shabti: bought from Salahaddin Sirmali, "authenticated and appraised" by Hossen Rashed, then imported to the US in 1948.
- An Egyptian Mummy mask dating from 700BC-30BC, is on offer for £11,807 ($15,275) online by a seller in Mexico
- A coffin lid dating back to 664BC-332BC was offered for sale by a Colorado-based art dealer, with a starting price of $65,000
- A shabti that was on sale through a Chicago-based coin dealer, dating from 1567BC-1085BC, is up for $1,950
What is graphene?
Graphene is extracted from graphite and is made up of pure carbon.
It is 200 times more resistant than steel and five times lighter than aluminum.
It conducts electricity better than any other material at room temperature.
It is thought that graphene could boost the useful life of batteries by 10 per cent.
Graphene can also detect cancer cells in the early stages of the disease.
The material was first discovered when Andre Geim and Konstantin Novoselov were 'playing' with graphite at the University of Manchester in 2004.
The Africa Institute 101
Housed on the same site as the original Africa Hall, which first hosted an Arab-African Symposium in 1976, the newly renovated building will be home to a think tank and postgraduate studies hub (it will offer master’s and PhD programmes). The centre will focus on both the historical and contemporary links between Africa and the Gulf, and will serve as a meeting place for conferences, symposia, lectures, film screenings, plays, musical performances and more. In fact, today it is hosting a symposium – 5-plus-1: Rethinking Abstraction that will look at the six decades of Frank Bowling’s career, as well as those of his contemporaries that invested social, cultural and personal meaning into abstraction.
How Alia's experiment will help humans get to Mars
Alia’s winning experiment examined how genes might change under the stresses caused by being in space, such as cosmic radiation and microgravity.
Her samples were placed in a machine on board the International Space Station. called a miniPCR thermal cycler, which can copy DNA multiple times.
After the samples were examined on return to Earth, scientists were able to successfully detect changes caused by being in space in the way DNA transmits instructions through proteins and other molecules in living organisms.
Although Alia’s samples were taken from nematode worms, the results have much bigger long term applications, especially for human space flight and long term missions, such as to Mars.
It also means that the first DNA experiments using human genomes can now be carried out on the ISS.
In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
Titanium Escrow profile
Started: December 2016
Founder: Ibrahim Kamalmaz
Based: UAE
Sector: Finance / legal
Size: 3 employees, pre-revenue
Stage: Early stage
Investors: Founder's friends and Family
Killing of Qassem Suleimani
