Rent control is a new debate in Ghana. It was proposed by the government to help solve the housing crisis in Ghana, but it has been met with opposition from landlords and developers who argue that rent caps will discourage private development.
The advantages of rent control are that it would provide affordable housing for low income earners, protect against inflationary increases in rental prices, ensure tenants have access to safe living conditions, and promote social justice. Opponents argue that rent controls could deter investment in infrastructure needed to improve living standards for all citizens. Rent control may also lead some landlords to neglect their properties or raise rents on non-controlled units because they can make more profit this way.
This blog post explores the pros and cons of implementing rent control
The government of Ghana wants to introduce the following rent control legislation to help solve the housing crisis in Ghana:
1. Any landlord or owner who fails to maintain and repair properties and/or use them as residential accommodation, or whose premises are not compliant with health, safety and fire safety regulations shall be liable to a fine of GH¢5,000 or 6 months’ imprisonment or both.
2. Any landlord or owner who enters into a rent agreement with any prospective tenant for rental, who fails to first and solely ask the prospective tenant to deposit a minimum amount of one month’s rent as security deposit before considering or entering into the agreement shall be guilty of an offence punishable by a fine of 2,000 Ghana cedis or both.
There is little incentive for landlords to build affordable housing and protect against inflationary increases in rent, as their income is largely unaffected by any rise in rent. The interest to build and rent a new property in Ghana has stayed the same, meaning the return on investment for landlords will be the same. Landlords could rent out more units, which would result in new property owners entering the market.
Increased land use would result in demand for housing that is affordable to the low income market. This would result in a pressure for government to improve the condition of existing homes and make new housing available to low income earners. Private developers will be forced to build affordable housing to match the growing demand.
Rent control would not affect the cost of housing for low income earners, who make up roughly 70% of the population. However, low income earners spend a disproportionately high amount of their income on housing, which is a good reason for policymakers to consider rent control.
Rent control would also not affect the supply of housing, since the amount of housing being built is insufficient to meet the demand. The lack of supply is made worse by high levels of income inequality. In Ghana, housing stock is far less equal than the nation’s wealth distribution.
In a small city like Kumasi, for example, high income earners can afford high quality housing while most low income earners are crammed into squalid conditions.
This week, the World Bank released a new research paper titled 'Addressing the housing crisis: The Ghana case'. In this paper, the authors examine the housing situation in Ghana, and make a case for the idea of introducing rent control. In the research paper, the authors stress that the key to ending the housing crisis in Ghana is through private development, but conclude that a mixture of measures including rent control is one way to start.
In July 2018, in its National Housing Policy, the government announced that it would move to introduce rent control in Ghana.
"The Policy seeks to take a decision to promote private sector development in order to accelerate the provision of decent, safe and affordable homes for all Ghanaians."
The policy proposed a rent ceiling at 4.