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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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  • 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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    References listed on IDEAS

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    1. J. E. Stiglitz, 1999. "Introduction," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 28(3), pages 249-254, November.
    2. Griffith L. Garwood & Dolores S. Smith, 1993. "The Community Reinvestment Act: evolution and current issues," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Apr, pages 251-267.
    3. Donohue, John J, III & Heckman, James, 1991. "Continuous versus Episodic Change: The Impact of Civil Rights Policy on the Economic Status of Blacks," Journal of Economic Literature, American Economic Association, pages 1603-1643.
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    Cited by:

    1. repec:spo:wpecon:info:hdl:2441/8988 is not listed on IDEAS
    2. Gabriel Desgranges & Étienne Wasmer, 2000. "Appariements sur le marché du logement," Annals of Economics and Statistics, GENES, issue 58, pages 253-287.
    3. 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.
    4. repec:spo:wpecon:info:hdl:2441/9023 is not listed on IDEAS
    5. Etienne Wasmer, 2005. "Housing market discrimination, housing regulations and intermediaries," Post-Print hal-01053551, HAL.
    6. Alex Anas & Richard Arnott, 2004. "Moving costs, security of tenure and eviction," Urban/Regional 0408005, EconWPA.
    7. 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.
    8. 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.

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