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Rent Caps in Gcc

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RENT CAPS IN GCC

Rent caps are basically price control imposed in housing by government rules and policies. When there is a huge demand for housing the rent used to increase considerably. The people could not afford this sudden increase in the price. Hence, there was government intervention in form of rules and regulations stating that rents could not be increased more than a certain amount/percentage. Rent caps are based on the argument that housing is inelastic i.e. increase in demand will not increase the supply in short period of time. When the demand for housing rises the rent used to increase without any constraints. So, the government introduced rent caps to regulate the increase in price of housing rents. Rent caps is still an ongoing debate as most economists think it as the second best way to destroy a city. They claim that due to rent caps there is low motivation for landlords to construct or maintain their housing. The landlords find themselves with low profit or even losses due this price control scheme. The tenants who are protected by this scheme are reluctant to leave their old buildings and use space wastefully. The landlords or owners who construct new buildings impose a higher rent than they would have in a free market. Economists also claim that if proper incentive to landlords are provided then supply would not be less in a long run of time. Thus, housing being inelastic is wrong assumption in the long run. The rent caps discourages owners to build new houses and maintain previous ones and thus the economy of the country falls. This results in the country having a poor GDP (Gross Domestic Profit).

RENT CAPS IN GCC GCC countries like United Arab Emirates (UAE), Qatar have introduced rent caps considering the huge increase of rents and its effects on tenants. For example when the rents of Dubai started

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