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Rent Control and Misallocation

  • Morten Skak
  • Gintautas Bloze

Rent control is still an important type of government regulation of housing markets in many countries and numerous researchers have studied its implications for allocation, welfare and investments in housing. The present paper aims to improve our understanding of the effect of second-generation rent control when it is applied only to one sector of the rental market. It is diagrammatically shown that the welfare effects are very different between a universal and a limited application of rent control. Studying the Danish case of second-generation rent control, lower rents are found in controlled sectors and a minor increase of the rent in the uncontrolled sector. Using the area of living space in the dwelling as a measure for housing consumption, evidence is also produced of both overallocation and underallocation of housing in the rent-controlled sectors; as envisaged by economic theory.

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File URL: http://usj.sagepub.com/content/50/10/1988.abstract
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Article provided by Urban Studies Journal Limited in its journal Urban Studies.

Volume (Year): 50 (2013)
Issue (Month): 10 (August)
Pages: 1988-2005

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Handle: RePEc:sae:urbstu:v:50:y:2013:i:10:p:1988-2005
Contact details of provider: Web page: http://www.gla.ac.uk/departments/urbanstudiesjournal

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  1. Morten Skak, 2008. "Projecting Demand for Rental Homes in Denmark," International Journal of Housing Policy, Taylor & Francis Journals, vol. 8(3), pages 235-262.
  2. Häckner, Jonas & Nyberg, Sten, 1998. "Rent-Control and Prices of Owner Occupied Housing," Research Papers in Economics 1997:7, Stockholm University, Department of Economics.
  3. 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.
  4. Gyourko, Joseph & Linneman, Peter, 1990. "Rent controls and rental housing quality: A note on the effects of New York City's old controls," Journal of Urban Economics, Elsevier, vol. 27(3), pages 398-409, May.
  5. Richard Arnott, 1995. "Time for Revisionism on Rent Control?," Journal of Economic Perspectives, American Economic Association, vol. 9(1), pages 99-120, Winter.
  6. Franz Hubert, 1993. "The Impact of Rent Control on Rents in the Free Sector," Urban Studies, Urban Studies Journal Limited, vol. 30(1), pages 51-61, February.
  7. Edward L. Glaeser, 1996. "The Social Costs of Rent Control Revisited," NBER Working Papers 5441, National Bureau of Economic Research, Inc.
  8. Marks, Denton, 1984. "The effects of partial-coverage rent control on the price and quantity of rental housing," Journal of Urban Economics, Elsevier, vol. 16(3), pages 360-369, November.
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