Rent Control, Market Segmentation, and Misallocation: Causal Evidence from a Large-Scale Policy Intervention

Abstract

"This paper studies market segmentation that arises from the introduction of rent control. When a part of the market remains unregulated, theory predicts an increase of free-market rents due to the misallocation of households to dwellings. To document this mechanism empirically, we study a large-scale policy intervention in the German housing market. We isolate the misallocation mechanism by exploiting temporal variation in treatment dates in an event study design. We find a robust positive spillover effect of rent control on free-market rents. Moreover, mobility of renters living in rent-controlled units decreased." (Author's abstract, IAB-Doku, © 2022 Elsevier) ((en))

Cite article

Mense, A., Michelsen, C. & Kholodilin, K. (2023): Rent Control, Market Segmentation, and Misallocation: Causal Evidence from a Large-Scale Policy Intervention. In: Journal of Urban Economics, Vol. 134. DOI:10.1016/j.jue.2022.103513