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♪ [music] ♪
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- [Alex] Rent controls are
popular with renters
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all over the world
because they appear
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to offer lower prices
with few adverse consequences.
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In the long run, however,
extensive rent controls can cause
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entire cities to crumble.
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You can see that today
in Mumbai, India.
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All of the predicted consequences
of rent control can
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be seen in Mumbai.
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There was a shortage
of rental housing.
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Very ,very little new rental
housing is being constructed,
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and the stock of old rental housing
is crumbling and falling apart.
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At rents of 500
to 600 rupees a month,
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maybe $10 a month,
the landlords can't even afford
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to pay the taxes, let alone pay
the maintenance and the upkeep.
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Rent controls began in Mumbai
in 1949, when rents were frozen
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at 1940 levels, and amazingly,
rents have barely increased
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since that time,
despite tremendous inflation
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and increased urbanization.
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To learn more,
I spoke with Vaidehi Tandel,
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Reuben Abraham,
and Kshitij Batra
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from the IDFC Institute,
a think tank in Mumbai
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that works on issues
of urban infrastructure.
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They froze rents at 1940 levels?
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- [Reuben] They did.
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We hear of these stories
where families are paying
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a few hundred rupees a month
for a flat that would otherwise
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cost maybe
a lakh of rupees a month.
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- You're going to have to tell us
what a lakh is.
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- I'm sorry. So that would
be about 100,000 rupees.
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- Wow. So they're paying
100 or 200, 300 rupees a month
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for something which is
worth 100,000.
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- Yeah. In this case, you have
actually a lot of families
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that are perfectly well-to-do,
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but they've just been grandfathered
into these rent-controlled flats,
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and they've been living
there for that time.
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These are massive properties.
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Some of these are massive,
massive apartments.
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- In India, tenant rights are
very, very strong,
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and the court system is
very, very slow.
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The owner of this building --
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which has long been
under rent control --
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has long tried to evict the tenants.
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In fact, the owner of this building
has been involved in a lawsuit
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that was started
by his grandfather 50 years ago.
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There's a remarkable sign
from the owners.
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Take a look.
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"Portions of the said building are
in ruinous condition,
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likely to fall, and dangerous
to any person occupying
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or passing by the same."
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It's falling apart.
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It's beginning to crumble.
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Now in part, that's a threat
to try and get the tenants to leave,
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but it's an all
too believable threat.
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- [woman] Another deadly
building collapse in India.
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A five-story apartment building
fell in Mumbai
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early Friday morning,
while people were fast asleep.
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It's unknown exactly
how many people are still
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underneath the rubble.
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Rescuers have been digging
for survivors all day long.
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- [Vaidehi] There's really
no incentives for them to maintain
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the existing stock and you see
really bad deterioration
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of the buildings
that are under rent controls.
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So the government then had
to go and create
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an assessed buildings policy
which sort of looks after
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these buildings and pays
for their maintenance.
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- Assess as a special tax.
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- Yes, for repairing and maintaining
these very, very dilapidated
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and at-risk rent control buildings.
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- So does the government actually
use the proceeds of the tax
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to fix the buildings?
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- I'm not sure, actually.
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- [Alex] There's another problem
with rent controls in Mumbai.
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Rent controls encourage landlords
to leave their properties vacant
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rather than renting them out,
risking the possibility
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of having a tenant
that they can't evict
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for the next half-century.
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It's no surprise that 15 percent
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of the housing stock
in Mumbai lies vacant. 426