Hmm, it seems like you're suggesting setting up a system where the private and public sectors keep the other in-check, with incentives to make sure it happens. But I see some practical points of concern, e.g. in most rent-controlled housing, the rent (eventually) gets to be much lower than the private market - thus removing pressure that customers will leave. Also, historically most governments seem to have no trouble getting votes even as their services become more and more inefficient over time. I guess I just don't see it working as you described. But its quite possible that I'm just too cynical! :)