May 23, 2011
The Washington Post reports that Portugal is changing its rent control laws at the insistence of the European Union and the IMF because they impede the movement of workers looking for new jobs. While there can be cases in which workers will be reluctant to give up a rent-controlled unit in order to get a job in another city where they will have to pay higher rent, homeownership also can pose the same obstacle to moving.
If there is a price to rent (annual) ratio of 15 to 1, and sale costs average 6-7 percent of the house price, then a worker moving to a new city can basically expect to give up a year’s worth of rent to cover the cost of the move.
This article also includes the assertion that employment protection legislation, that prevents employers from firing workers at will, impedes growth. Actually, there has been considerable research on this topic and most of it suggests that these measures have little impact on employment and growth.
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