Suppose it is decided that rent control in New York City will be abolished and that market rents will now prevail. Assume that all rental units are identical and so are offered at the same rent. To address the plight of residents who may be unable to pay the market rent, an income supplement will be paid to all low income households equal to the difference between the old controlled rent and the new market rent.
What effect will the elimination of the rent control have on quantity and quality of rental housing supplied?
a. Eliminating the rent control will cause quantity supplied to increase but housing quality will decrease.
b. Eliminating the rent control will cause quantity supplied to decrease but housing quality will improve.
c. Eliminating the rent control will cause both quantity supplied and housing quality to increase.
d. Eliminating the rent control will cause both quantity supplied and housing quality to decrease.