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

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  • Mense, Andreas
  • Michelsen, Claus
  • Kholodilin, Konstantin A.

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. [91 words]

Suggested Citation

  • Mense, Andreas & Michelsen, Claus & Kholodilin, Konstantin A., 2023. "Rent Control, Market Segmentation, and Misallocation: Causal Evidence from a Large-Scale Policy Intervention," Journal of Urban Economics, Elsevier, vol. 134(C).
    • Handle: RePEc:eee:juecon:v:134:y:2023:i:c:s0094119022000894
    DOI: 10.1016/j.jue.2022.103513
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    More about this item

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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