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The Misallocation of Housing Under Rent Control

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  • Edward L. Glaeser
  • Erzo F. P. Luttmer

Abstract

When there are binding price controls, there are shortages and the allocation of goods across consumers may not be efficient. In general, the misallocation costs of price controls are first order, while the classic welfare losses due to undersupply are second order. This paper presents an empirical methodology for estimating the degree of misallocation of housing units due to rent control in New York City. This methodology involves comparing the relative consumption of different demographic groups within the rent controlled area with the relative levels of consumption in a free market area. Our best estimate of the costs of rent control in New York due to the misallocation of rental apartments is 200 dollars per apartment annually.

Suggested Citation

  • Edward L. Glaeser & Erzo F. P. Luttmer, 1997. "The Misallocation of Housing Under Rent Control," NBER Working Papers 6220, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:6220
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    References listed on IDEAS

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    1. Barzel, Yoram, 1974. "A Theory of Rationing by Waiting," Journal of Law and Economics, University of Chicago Press, vol. 17(1), pages 73-95, April.
    2. Cheung, Steven N S, 1974. "A Theory of Price Control," Journal of Law and Economics, University of Chicago Press, vol. 17(1), pages 53-71, April.
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    More about this item

    JEL classification:

    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General
    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing

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