The issue of rent control is a thorny one. On the one hand a free market economy is built on the very premise of what the market can bear. Real estate is an investment, and should be treated as such, regardless of whether land or property is purchased for personal use or for the generation of income, as with rental lodgings. In such a case the owner can fairly be expected to receive as much as the market is willing to pay for the use of his property, without outside interference. On the other hand, such a system may leave the marginalized on the streets, with the accompanying result that property values may then plummet.

Good democratic government may and should step in, and provide subsidized rental housing. Still, the cracks in any such government run system are large, and often governments at all levels feel the need to step further and establish rent controls in the private sector. New York City is a famous example for its historical rent control system imposed from above.

A fair percentage of the immigrants to North America ensured their financial security by trading in land. It was the traditional path to take. Arriving poor, they were initially renters. Once established to the degree of hazarding property purchase, renting to others often financed the first house. In the Toronto Estonian community of today many of the wealthiest members made their first million through canny real estate purchases, often mortgaged to the hilt, paid off by rental income. The system was in place to be taken advantage of - and they did.

In the Estonia of today, the stickiest political issue of recent weeks has been rent control. Sticky, because as expressed above, part of a free market economic philosophy is market, not government rent control - and Estonia's gains in the economic sphere have come thanks to free market ideals. Yet, a state has moral responsibility towards those less fortunate, and now the two realities - free-market principles and socialist dogma have met head to head, culminating in President Arnold Rüütel’s refusal to abolish rent ceilings.

State socialism does not work, proven over and over, without incentive for private enterprise. Sweden is the best example of a hybrid that can function. As always, though, there will remain those on the outside clamouring for more.

The moral and legal problems of rent control are numerous - especially when centered on residential accommodations. The classical economists like Malthus developed a theory that saw a price paid per unit of time for the use of something durable - and in Malthus' days, that durable was agricultural land, not as much as the buildings upon the land. These days, while land still rules - they are not making any more of it, are they? - the buildings that shelter today's non-agrarian workers are at the core of rent control debates.

European politics have been dominated by this very emotional question since WW II. Free-marketers argue that rent control is intrinsically unacceptable. In many ways they are correct, for rent control involves massive interference in contractual relations in favour of one party, sometimes after the bargain has been struck. That is the New York example in a nutshell. Protection is required for both parties - the landlord and the renter - and while the market usually levels supply and demand, political lobbying usually sees gains for one at the expense of the other.

Estonia, though, has yet to cement a solid social welfare network foundation, and thus the debate over rent control. Estonian President Arnold Rüütel has refused to promulgate amendments to the Estonian Housing Act that would see the abolishment of rent control. The three centre-right parties in the Estonian Riigikogu - Res Publica, Reform and Pro Patria - espouse free-market philosophy, and pushed for these amendments. Rüütel, Estonia's last Communist President, as well as figurehead of today's forward-looking economic juggernaut evidently is looking for past guidance while using his presidential prerogative.

This has become an emotional issue, more than one guided by reason and financial common sense. Estonia has rent-price limits for privately owned residential areas. The problem? The residue of the Soviet occupation. Pre-war owners of property, or their heirs, had time to prove legal ownership and have the illegally usurped property returned to them. In the heady days of independence regained apparatchiks and speculants took advanatage of the blue-eyed idealism and gained footholds in the real estate market. Government established rent ceilings as a measure to prevent landlords, whether pre-war legal owners living abroad, who had their property returned after lengthy and costly legal procedures, - or more likely, speculants looking to capitalize during a period of free-market euphoria - from squeezing out their tenants and then selling (or renting) property at inflated rates. While Tallinn's property values are far from those of Manhattan, purchase and or rental of reasonable apartments is beyond the reach of the average wage-earner.

Rüütel met this week with interested parties to explain his views. The Housing Act as passed in 1991 does guarantee the inviolability of property and free enterprise as well as to right the wrongs caused by violation of porperty rights during Soviet rule. The hope was to create preconditions for a transition to a free-market economy. The second objective was to prevent new injustice - violating the interests of those protected by law.

The three political parties (and the association representing property owners) who arguing against the rent ceilings strongly feel that new injustices are being perpetuated. Soviet times gave tenure of property without the responsibilities involved. Modern, free-market philosophy sees that tenure of property, i.e. ownership is at the root of every other security that a person may enjoy. Rental controls imposed from above without accompanying guarantees of state support to protect investment are a new form of injustice.

Baltic real estate experts suggest that, in most cases, tenants would not be force out by higher price as after the present rent ceiling is removed. Reasonable compromise should win the day. There is ample historical evidence that free-market principles, when allowed to run their logical course, serve the majority best over the long run.

Märkmed: