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Equilibrium Rent and Housing Policy Implications


  • Martin Lux
  • Petr Sunega


Housing-policy research in European Union countries distinguishes between two kinds of rent control: non-targeted ""first-generation"" rent control and targeted ""second-generation"" rent control, the later which better reflects housing market relations. The article demonstrates the drastic consequences of first-generation rent control in the Czech Republic, using criteria of social effectiveness and economic efficiency. The authors present the results of an econometric simulation model on the determination of equilibrium market rents after rent deregulation. Due to a sharp decrease in housing affordability in the Czech Republic, the authors simulate the application of two housing-policy instruments: social housing and housing allowance. A cost-benefit analysis shows that rent deregulation and the application of effective policy instruments would substantially increase the income of landlords, decrease the level of currently biased market rents, and maintain the relative affordability of housing.

Suggested Citation

  • Martin Lux & Petr Sunega, 2003. "Equilibrium Rent and Housing Policy Implications," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 53(1-2), pages 31-59, January.
  • Handle: RePEc:fau:fauart:v:53:y:2003:i:1-2:p:31-59

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    References listed on IDEAS

    1. Graciela Kaminsky & Saul Lizondo & Carmen M. Reinhart, 1998. "Leading Indicators of Currency Crises," IMF Staff Papers, Palgrave Macmillan, vol. 45(1), pages 1-48, March.
    2. Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 311-325, August.
    3. Maurice Obstfeld, 1994. "The Logic of Currency Crises," NBER Working Papers 4640, National Bureau of Economic Research, Inc.
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    More about this item


    housing policy; rent control; social housing; housing allowance;

    JEL classification:

    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • D49 - Microeconomics - - Market Structure, Pricing, and Design - - - Other
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household


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