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Rent control and misallocation

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Abstract

The paper considers welfare effects of rent control when it is applied only in a sector of a rental housing market. In rent controlled sectors of the Danish rental housing market, we find welfare reducing overallocation of square meters between 9 and 17 per cent of actual allocations. Looking at the 20 per cent most overallocated households, the overallocation of square meters is between 42 and 92 per cent, and the estimated corresponding welfare loss ranges from 1.5 to 5.3 per cent of the average annual rent in the sectors.

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  • Bloze, Gintautas & Skak, Morten, 2009. "Rent control and misallocation," Discussion Papers of Business and Economics 7/2009, University of Southern Denmark, Department of Business and Economics.
  • Handle: RePEc:hhs:sdueko:2009_007
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    References listed on IDEAS

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    1. 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.
    2. Edward L. Glaeser & Erzo F. P. Luttmer, 2003. "The Misallocation of Housing Under Rent Control," American Economic Review, American Economic Association, vol. 93(4), pages 1027-1046, September.
    3. Hackner, Jonas & Nyberg, Sten, 2000. " Rent Control and Prices of Owner-Occupied Housing," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(2), pages 311-324, June.
    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. Morten Skak, 2008. "Projecting Demand for Rental Homes in Denmark," International Journal of Housing Policy, Taylor & Francis Journals, vol. 8(3), pages 235-262.
    7. Edward L. Glaeser, 1996. "The Social Costs of Rent Control Revisted," Harvard Institute of Economic Research Working Papers 1747, Harvard - Institute of Economic Research.
    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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    Cited by:

    1. Lars Vandrei, 2018. "Does Regulation Discourage Investors? Sales Price Effects of Rent Controls in Germany," ifo Working Paper Series 262, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    2. Mense, Andreas & Michelsen, Claus & Cholodilin, Konstantin A., 2017. "Empirics on the causal effects of rent control in Germany," FAU Discussion Papers in Economics 24/2017, Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics.
    3. João Miguel Ejarque & Joachim Borg Kristensen, 2013. "Rent Control and the Housing Expenditure Share," CAM Working Papers 2013-01, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
    4. Mense, Andreas & Michelsen, Claus & Kholodilin, Konstantin, 2018. "Empirics on the causal effects of rent control in Germany," Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181625, Verein für Socialpolitik / German Economic Association.
    5. Thomschke, Lorenz, 2016. "Distributional price effects of rent controls in Berlin: When expectation meets reality," CAWM Discussion Papers 89, University of Münster, Center of Applied Economic Research Münster (CAWM).
    6. Lerbs, Oliver & Sebastian, Steffen P., . "Mietspiegel aus ökonomischer Sicht – Vorschläge für eine Neuregulierung," Beiträge zur Immobilienwirtschaft, University of Regensburg, Department of Economics, number 10.
    7. Micheli, Martin & Schmidt, Torsten, 2015. "Welfare effects of rent control — A comparison of redistributive policies," Economic Modelling, Elsevier, vol. 48(C), pages 237-247.

    More about this item

    Keywords

    Rent control; Housing; Regulation; Price ceiling; Rationing; Allocation;

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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