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Rent Control with Matching Economies: A Model of European Housing Market Regulation

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  • Anas, Alex

Abstract

Housing markets are thin, and consumer search for housing is costly, time consuming, and risky. Mismatches between tenants and dwellings are common in a laissez-faire market. There are scale economies in accumulating tenants and houses and then matching them up to improve welfare. In many European countries, some housing is rent controlled and rationed by public centralized matching. Waiting time, risk in rationing, and risk in matching are costs that arise from such regulation. We show that welfare improvements over laissez-faire occur if gains from centralized matching can offset the decrease in housing quality, the possible increase in waiting times, and the risks in rationing induced by rent controls. Under regulation, there is a welfare maximizing partition of the stock into free and controlled markets; and contrary to observed practice, it is often welfare improving to set controlled rents above (not below) laissez-faire, which increases the supply offered for centralized matching and the opportunity for a better match. Copyright 1997 by Kluwer Academic Publishers

Suggested Citation

  • Anas, Alex, 1997. "Rent Control with Matching Economies: A Model of European Housing Market Regulation," The Journal of Real Estate Finance and Economics, Springer, vol. 15(1), pages 111-137, July.
    • Handle: RePEc:kap:jrefec:v:15:y:1997:i:1:p:111-37
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    1. repec:hal:spmain:info:hdl:2441/9023 is not listed on IDEAS
    2. repec:spo:wpecon:info:hdl:2441/8988 is not listed on IDEAS
    3. Gabriel Desgranges & Étienne Wasmer, 2000. "Appariements sur le marché du logement," Annals of Economics and Statistics, GENES, issue 58, pages 253-287.
    4. Etienne Wasmer, 2005. "Housing market discrimination, housing regulations and intermediaries," Sciences Po publications info:hdl:2441/9023, Sciences Po.
    5. Alex Anas, 2013. "Commentary," Environment and Planning B, , vol. 40(6), pages 955-958, December.
    6. Arnott, Richard & Igarashi, Masahiro, 2000. "Rent control, mismatch costs and search efficiency," Regional Science and Urban Economics, Elsevier, vol. 30(3), pages 249-288, May.
    7. repec:hal:wpspec:info:hdl:2441/9023 is not listed on IDEAS
    8. repec:hal:spmain:info:hdl:2441/8988 is not listed on IDEAS
    9. Wilhelmsson, Mats, 2021. "Demand for rent-regulated apartments:The case of Sweden," Working Paper Series 21/4, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance.
    10. Lorenz Thomschke, 2019. "Über die Evaluierung der Mietpreisbremse [On the evaluation of the German rental price break]," Zeitschrift für Immobilienökonomie (German Journal of Real Estate Research), Springer;Gesellschaft für Immobilienwirtschaftliche Forschung e. V., vol. 5(1), pages 21-36, November.
    11. repec:spo:wpecon:info:hdl:2441/9023 is not listed on IDEAS
    12. Chen, Jiawei & Hui, Eddie Chi-Man & Seiler, Michael J. & Zhang, Hong, 2018. "Household tenure choice and housing price volatility under a binding home-purchase limit policy constraint," Journal of Housing Economics, Elsevier, vol. 41(C), pages 124-134.
    13. Etienne Wasmer, 2005. "Housing market discrimination, housing regulations and intermediaries," SciencePo Working papers hal-01053551, HAL.
    14. Alex Anas & Richard Arnott, 2004. "Moving costs, security of tenure and eviction," Urban/Regional 0408005, University Library of Munich, Germany.
    15. Van Ommeren, Jos N. & Van der Vlist, Arno J., 2016. "Households' willingness to pay for public housing," Journal of Urban Economics, Elsevier, vol. 92(C), pages 91-105.
    16. Gabriel Desgranges & Étienne Wasmer, 2000. "Appariements sur le marché du logement," Annals of Economics and Statistics, GENES, issue 58, pages 253-287.
    17. Hinrichsen, Julius & Nitt-Drießelmann, Dörte & Wellenreuther, Claudia & Wolf, André, 2021. "Der Eigentumsbegriff in den Parteiprogrammen zur Bundestagswahl 2021: Eine ökonomische Analyse," HWWI Policy Papers 133, Hamburg Institute of International Economics (HWWI).
    18. Hans Lind, 2001. "Rent Regulation: A Conceptual And Comparative Analysis," European Journal of Housing Policy, Taylor and Francis Journals, vol. 1(1), pages 41-57.
    19. repec:hal:wpspec:info:hdl:2441/8988 is not listed on IDEAS

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