Rent Control in Ghana: Impact on Tenants and Landlords
Rent control is a government program that places a limit on the amount that a landlord can demand for leasing a home or renewing a lease. Rent control laws are usually enacted by municipalities, and the details vary widely, all intended to keep living costs affordable for lower-income residents. The rent control laws of Ghana provide that the landlord can apply to the rent magistrate for the ejection of a tenant from a property where any rent lawfully due from the tenant has not been paid or tendered within one month after the date on which it became lawfully due. The Ghana Rent Act of 1963 (as amended) states that a deposit of six months is the maximum that a landlord can request from a tenant. This national rental assistance scheme will embolden landlords to keep charging the two-year advance rent, which is illegal in terms of the Rent Act. The main objective of rent control is to keep housing affordable. In this article, the pros and cons of rent regulations are examined.
Advantages of rent control:
- Housing becomes more affordable: One important advantage of rent control is that it can provide us with more affordable housing opportunities. In many big cities, rents are so high that people who work in regular jobs are only able to afford shared housing or even have to live on the streets. This should not be a long-term solution, and everyone who works hard in his or her daily life should have the opportunity to rent an apartment without having to spend the majority of his or her wage on it each month.
- More money to spend on other things: If people have to spend less money on rent due to rent control regulations, they would have much more money to spend on other things. This may include investments in education. We all know that education is a key driver for success in life, and parents with low or medium incomes are often not able to provide their kids with proper education since they have a far too high fraction of their income on monthly rent payments. For those people, rent control would be quite beneficial since they could spend more money on their kids’ education, which would, in turn, translate into better job opportunities for those kids and also increase the chances for more success in their lives in general.
- More money for retirement age: Many retirees all over the world complain that they do not have enough money to buy basic things for their daily life and to pay their rent each month. Once they get retired, those people will barely be able to ensure their livelihood. This is especially true since pensions are rather fixed and will not increase too much while rents may increase much faster. In the worst case, those old people may end up homeless, even though they worked their whole life.
- Tenants may take better care of the property: Another upside of rent control is that tenants may also take much better care of the respective property. For instance, without rent control, people may not care much about the property at all since rents will be quite high, and people may not fear losing their flat too much since they already pay quite a high price. However, through the introduction of rent control, people would likely care about the property much more since they would have a greater fear of losing their affordable housing opportunities.
Disadvantages of rent control:
- May conflict with current laws: Apart from the many disadvantages of rent control, there are also some issues related to it. One problem with rent control is that it may conflict with local laws. In many countries all over the world, rent control schemes may not be in line with the local constitutions and may, therefore, not be feasible to implement. Chances are that landlords may not accept those kinds of rent regulations and may stop those regulations in court.
- Rent control may lead to the deterioration of buildings: Another significant disadvantage of rent control is that this regulatory measure can also lead to a significant deterioration of buildings over time. In fact, if the rent is capped at a certain amount, property owners will have no incentive to invest money in renovations since the return on these measures is often too low to justify the significant renovation costs. In turn, many buildings may deteriorate over time, and in the long run, there might even be fewer affordable housing opportunities if landlords are no longer willing to invest money for maintenance and renovations into their properties.
- Landlords may ignore the rent regulations: Depending on the fines associated with violations of rent control regulations, many landlords may also just ignore those regulations. In case they do not have to fear high fines, landlords may continue to increase rents, and rent control measures might be quite inefficient.
- Owners may find loopholes: Another downside of rent control is that it often provides landlords with a significant number of loopholes that can be exploited. For instance, landlords may rent a furnished flat and might be able to charge a much higher rent compared to renting the same flat in an unfurnished condition. Hence, regulators have to make sure to close those loopholes to not do more harm than good with those rent regulations.