Rent Control in Mumbai

♪ [music] ♪

- [Alex] Rent controls are
popular with renters

all over the world
because they appear

to offer lower prices
with few adverse consequences.

In the long run, however,
extensive rent controls can cause

entire cities to crumble.

You can see that today
in Mumbai, India.

All of the predicted consequences
of rent control can

be seen in Mumbai.

There was a shortage
of rental housing.

Very ,very little new rental
housing is being constructed,

and the stock of old rental housing
is crumbling and falling apart.

At rents of 500
to 600 rupees a month,

maybe $10 a month,
the landlords can't even afford

to pay the taxes, let alone pay
the maintenance and the upkeep.

Rent controls began in Mumbai
in 1949, when rents were frozen

at 1940 levels, and amazingly,
rents have barely increased

since that time,
despite tremendous inflation

and increased urbanization.

To learn more,
I spoke with Vaidehi Tandel,

Reuben Abraham,
and Kshitij Batra

from the IDFC Institute,
a think tank in Mumbai

that works on issues
of urban infrastructure.

They froze rents at 1940 levels?

- [Reuben] They did.

We hear of these stories
where families are paying

a few hundred rupees a month
for a flat that would otherwise

cost maybe
a lakh of rupees a month.

- You're going to have to tell us
what a lakh is.

- I'm sorry. So that would
be about 100,000 rupees.

- Wow. So they're paying
100 or 200, 300 rupees a month

for something which is
worth 100,000.

- Yeah. In this case, you have
actually a lot of families

that are perfectly well-to-do,

but they've just been grandfathered
into these rent-controlled flats,

and they've been living
there for that time.

These are massive properties.

Some of these are massive,
massive apartments.

- In India, tenant rights are
very, very strong,

and the court system is
very, very slow.

The owner of this building --

which has long been
under rent control --

has long tried to evict the tenants.

In fact, the owner of this building
has been involved in a lawsuit

that was started
by his grandfather 50 years ago.

There's a remarkable sign
from the owners.

Take a look.

"Portions of the said building are
in ruinous condition,

likely to fall, and dangerous
to any person occupying

or passing by the same."

It's falling apart.

It's beginning to crumble.

Now in part, that's a threat
to try and get the tenants to leave,

but it's an all
too believable threat.

- [woman] Another deadly
building collapse in India.

A five-story apartment building
fell in Mumbai

early Friday morning,
while people were fast asleep.

It's unknown exactly
how many people are still

underneath the rubble.

Rescuers have been digging
for survivors all day long.

- [Vaidehi] There's really
no incentives for them to maintain

the existing stock and you see
really bad deterioration

of the buildings
that are under rent controls.

So the government then had
to go and create

an assessed buildings policy
which sort of looks after

these buildings and pays
for their maintenance.

- Assess as a special tax.

- Yes, for repairing and maintaining
these very, very dilapidated

and at-risk rent control buildings.

- So does the government actually
use the proceeds of the tax

to fix the buildings?

- I'm not sure, actually.

- [Alex] There's another problem
with rent controls in Mumbai.

Rent controls encourage landlords
to leave their properties vacant

rather than renting them out,
risking the possibility

of having a tenant
that they can't evict

for the next half-century.

It's no surprise that 15 percent

of the housing stock
in Mumbai lies vacant.

- [Reuben] I think
the census in 2011 --

that's a government survey --

found that around
11 million properties were

lying vacant across urban India,
which is a huge number,

given that
they themselves estimated

that the housing shortfall
is 18 million.

- [Alex] It's clear
that abolishing rent controls

would solve many of these problems,
but are there other ways

to get more affordable housing
on the market?

Can the government build
more homes for the poor?

- [ ] I've been working
on this particular issue

for at least nine years now,
and I have moved from calling it

"affordable housing" to calling it
"making housing affordable."

Any housing that comes
into the market will be captured

by the rich or whoever
have the means to capture it.

So therefore I would argue
that the real focus now

should be on just increasing
the supply of housing,

because if you don't increase
the supply of housing,

the rich will just
keep capturing it.

So you will see numerous instances
just in Mumbai itself

of you look at an urban plan,
and you see these plans

for affordable housing
where four 1-bedroom apartments

have effectively become
one 4-bedroom apartment.

So you've literally grabbed
from the poor 542