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How does abolishment of rent control affect returns on residential investments in the long run?

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  • Sviatlana Engerstam

Abstract

Abolishment of rent control in residential market is seen as one of the solution to Swedish housing shortage. Politicians believe that it will provide higher incentives for investors and property companies to construct more rental housing and to stabilize property prices in the long-run.The aim of the study is to find out if the abolishment of rent control in housing market leads to more residential investments and more stable returns on it in the long run.The method is a comparative analysis of returns on residential investments in two case countries - with and without rent control - Sweden and Finland. Data covers the time period of 2000-2015 and include total, capital and income return on residential investments from Property databank in Sweden and Finland. The study considers the effects of abolishment of rental regulations on residential market with control for changes in fundamental variables like GDP, income, population growth, dwelling stock and interest rate.The results of the study demonstrate that abolishment of rent control leads to more stable total returns on residential investments in the long run. It also leads to higher level of income return and less fluctuation in capital return in the long run.

Suggested Citation

  • Sviatlana Engerstam, 2017. "How does abolishment of rent control affect returns on residential investments in the long run?," ERES eres2017_260, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2017_260
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    References listed on IDEAS

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    1. David H. Autor & Christopher J. Palmer & Parag A. Pathak, 2014. "Housing Market Spillovers: Evidence from the End of Rent Control in Cambridge, Massachusetts," Journal of Political Economy, University of Chicago Press, vol. 122(3), pages 661-717.
    2. Werner Z. Hirsch, 1988. "Rent Control and the Value of Rental Income Property," UCLA Economics Working Papers 475, UCLA Department of Economics.
    3. Sims, David P., 2007. "Out of control: What can we learn from the end of Massachusetts rent control?," Journal of Urban Economics, Elsevier, vol. 61(1), pages 129-151, January.
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    Cited by:

    1. Konstantin A. Kholodilin, 2022. "Rent Control Effects through the Lens of Empirical Research: An almost Complete Review of the Literature," Discussion Papers of DIW Berlin 2026, DIW Berlin, German Institute for Economic Research.

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    More about this item

    Keywords

    Property returns; Rent Control; Residential markets;
    All these keywords.

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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