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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

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Bibliographic Info

Article provided by Springer in its journal Journal of Real Estate Finance & Economics.

Volume (Year): 15 (1997)
Issue (Month): 1 (July)
Pages: 111-37

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Handle: RePEc:kap:jrefec:v:15:y:1997:i:1:p:111-37

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Web page: http://www.springerlink.com/link.asp?id=102945

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  1. repec:spo:wpecon:info:hdl:2441/9023 is not listed on IDEAS
  2. repec:spo:wpecon:info:hdl:2441/8988 is not listed on IDEAS
  3. Bas van der Klaauw & Udo Kock, 1999. "Evaluating Dutch Housing Market Regulation," Tinbergen Institute Discussion Papers 99-007/3, Tinbergen Institute.
  4. Gabriel DESGRANGES & Étienne WASMER, 2000. "Appariements sur le marché du logement," Annales d'Economie et de Statistique, ENSAE, issue 58, pages 253-287.
  5. 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.
  6. 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, April.
  7. Etienne Wasmer, 2005. "Housing Regulation, Statistical Discrimination, and the Recourse to Agencies," Sciences Po publications info:hdl:2441/9023, Sciences Po.
  8. Alex Anas & Richard Arnott, 2004. "Moving costs, security of tenure and eviction," Urban/Regional 0408005, EconWPA.

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