Incidence, Allocation, and Efficiency Costs of Tenancy Rent Control

Tenancy rent control limits rent increases for sitting tenants while allowing market resets at vacancy. When demand grows or household composition differs across segments, spillovers raise rents in the unregulated market. We study its general equilibrium effects in Switzerland, where a nationwide regime meets large spatial variation. Linking administrative records on all households from 2010–2022 to detailed unit data and market rents, we estimate a structural sorting model with heterogeneous preferences, correcting for selection and price endogeneity. Counterfactual simulations show unregulated rents would be 8–21 percent lower, with the largest drops in supply-inelastic cities. Older, lower-income, and less educated households gain most, while newcomers face higher entry rents. The policy reduces mobility and induces space overconsumption, generating efficiency losses.