Allocation Mechanisms Under a Rent Ceiling
A city's rental market has 8,000 apartments, which are all occupied at a rent of €500. After a sudden influx of new residents, 12,000 households are now trying to rent an apartment at the €500 price. The government enforces a strict rent ceiling at €500, making it illegal for rents to rise and for tenants to sublet. Since price can no longer be used to determine who gets an apartment, describe two alternative methods that might emerge to allocate the scarce 8,000 apartments among the 12,000 interested households.
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Housing Market Intervention Analysis
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Allocation Mechanisms Under a Rent Ceiling