Estimating the cost of first-generation rent control in Italy: the case of Florence, 1950–1963

Among the many costs of rent control, one is the cost imposed upon landlords. This cost is measured as the difference between the controlled rent and the hypothetical free market rent that would prevail in the absence of rent controls. Although recent studies estimate the size of this particular cost in modern contexts, there are relatively few research contributions on pre-1970s European rent controls, largely as a consequence of the absence of easily-accessible data for older rental markets. This study addresses this issue by using original historical data on 362 controlled and uncontrolled housing units in Florence between 1950 and 1963 in order to estimate the hypothetical free market rent of those units, and the cost imposed on landlords by rent control. Analysis of a sample of 4,081 apartments-years, 3,574 of which are controlled apartments-years while 507 are uncontrolled apartments-years, indicates that per-room rents on controlled units were between about €19.5 and €22 lower than those on free-market units, depending on the subsample and the type of analysis. Based on 317 separate five-room housing units, inverse probability weighting approach estimates suggest that the aggregate cost to landlords of rent control is almost €31,000 per month, or about €370,000 per year.