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Governments have on many occasions intervened in the market to establish a binding price ceiling Government-facilitated intervention may often be justified by the continuation of the endemic of market failure, which prevents the market from performing efficiently. In such situations regulation may be essential in enhancing social welfare. The classic market failure may be a natural monopoly that arises when the market demand may not support more than one single firm, as the costs of production may increase significantly if demand is divided among many firms. Under such conditions, direct government intervention of the firm's prices may increase productive and allocative efficiency by having control of the market power. One such example of governments intervention in the market to set up a binding price ceiling was the period between 1945 to 1978, when the Italian Government had rent controls legislated. 1) Why the Italian Government acted this way The Italian government put a price ceiling scheme so as to ensure rapid development within the economy the effect had numerous positive and negative implications. With the implementation of the rent control, it facilitated the people from lower socio-economic backgrounds in having a platform by acquiring affordable rental prices into the property market, although at the same time affecting the owners or the land lords of the property since they were

Surname not capable of trading in a completely competitive market, consequently, these disheartened landlords in performing preparations and maintenance upon their properties. 2) The rental accommodation market before and after rent controls introduction In a completely competitive market rental accommodation before implementation of rent

controls, prices may be usually defined by wants from landlords and renters which would reach an equilibrium price and reflect the markets position. A renter may be willing to pay more for a property if he or she holds the ability to ensure security; while a landlord may be obligated to lower prices when they cannot find an eligible renter to rent their property. Implementation of rent control may have short term effects, since there may be a rapid growth in the market and a coinciding rental properties demand: hence a shortage of properties may occur because of the increase in demand. Owing to these price ceiling, the landlords may not have the capacity to realize a larger percentage of earnings, off their properties put back into the rental market, this may be now evident as the rental properties supply may drop substantially and the meeting of an equilibrium level between buyers and sellers may not happen. As a result, landlords may be discouraged to put back profit earned into their property as it may be seen unnecessary. 3) The Black Market operations and the people that benefit or lose The black market may come into existence when price ceiling occurs, and there is a shortage; also it exists when somebody may not obtain needed goods since a price ceiling decreases the quantity, hence, they may turn to the black market. Those that, by good management or luck obtain those goods in short supply may profit through illegally selling at a higher price than the free market permits. The black market price may be higher than the free market price since the quantity may be less than in a free market transaction, since more sellers can afford to sell the product. People may sometimes be forced to purchase at these higher prices

Surname once a shortage happens and there may be no other place to obtain purchase them. This

inevitable, benefits the landlord since they may be able to act as dictators and receive payments from people that may be willing to pay for their properties. This may be viewed as a loss to the renter even though it may also be positive since they have already out bidden other potential buyers. 4) Other problems that may arise with the introduction of a price ceiling on the demand side and on the supply side. On the demand side, when the Italian government enforced rent-controlled housing it may have been difficult to locate vacant housing, resulting to power imbalance between tenants and landlords, as tenants may have overall "game in the system and impose onerous conditions on the landlord, forcing long judicial action cycles, leading to significant economic hardship for the landlord. Similarly, new tenants may have serious difficulty locating housing, so they may be seriously disadvantaged when they must move. Consequently, landlords may impose numerous requirements and conditions. In doing so the rental property demand increases, in turn creating rental properties shortage. On the supply side, because of the Italian government introducing price ceiling, the landlords no longer had the ability to be rewarded with huge profits and successfully, this was represented on their properties, since most never put money back into the rental market to sustain their property. This caused numerous houses to decay and age. Most economists have the belief that a ceiling on rents may reduce the quantity and quality of available housing. Despite its good intentions, it increases urban blight, raises prices and leads to the creation of less housing. 5) Non-price techniques of allocation that the government ought to introduce to achieve administrative efficiency and fairness in the now regulated rental market.

Surname The government must prioritize its most important demographic when rental property is in

high demand. Families, the elderly and disabled should be first in preference when it comes to achieving a level of fairness. These people are in greater need of shelter, as opposed to a young couple who want to move out of home due to cheap rental pricing. This would be simple and easy to enforce through an efficient administration team. Another effective strategy would be for the Government to pay a fraction of the rent for the poor families, this would mean they would not need rent control; such rent subsidies so as not decrease the number of housing supplied and consequently, not lead to shortage in housing. In a nutshell, wage subsidies elevate the standards of living for the working poor without having to discourage firms from offering them. Though these alternative policies may often be better than price controls, they may not be perfect. Wage and rent subsides cost the government money which will fundamentally increase wages. 6) Options that may be open to the landlords (owner of a rental property) to choose a renter, in the absence of a government method of allocation? One way in which a landlord may allocate a property may be to view the potential tenants track record, by having done this the landlord would be able to access whether the person may be able to pay rent on time using records of the previous property and if the renter received their complete bond, back. When this is assured, the landlord may have a clear indication that their property would be in safe hands, and may not have to worry about late payments and damage. Another effective method not involving the government intervention can be to choose someone who may be of association to the landlord. This may be a family member or friend; this may be someone appropriate to the residence as the landlord may be able to have faith in the person(s) that will live in their property.

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7) One of the methods that governments operate and its advantage over the other techniques. When the governments establish a binding price ceiling in the market it takes effect and drastically moves the equilibrium price. By implementing a legislated price ceiling through the Italian rent controls of 1945 to 1978, it was made difficult for landlords to go over the price ceiling and achieve their desired profit for the rental property. By doing this, the Italian government, put an immediate and long-term price cut on the rental property owners and in this case the landlords. Conversely, if the government was to subsidize landlords to aid them in still bringing in an adequate earning for each property investment it would stabilize the market and help property owners in looking after their property, developing and growing the rental property market. By subsiding landlords, the government therefore, assist the rental property market stabilize and help it find an equilibrium point within the now legislated market. Work cited J. Gans, S. King, N. G. Mankiw, Principles of Microeconomics, 4th ed, Nelson Australia Pty Limited, 2009.