IDEAS home Printed from https://ideas.repec.org/a/eee/regeco/v103y2023ics0166046223000832.html
   My bibliography  Save this article

Measuring the value of rent stabilization and understanding its implications for racial inequality: Evidence from New York City

Author

Listed:
  • Chen, Ruoyu
  • Jiang, Hanchen
  • Quintero, Luis E.

Abstract

Amid a renewed interest in rent control due to the housing affordability crisis, the scope and distribution of its benefits remain underexplored. Using methodological innovations, this study quantifies rent discounts for rent-stabilized units in New York City (NYC) from 2002 to 2017. We estimate an average discount of $410 per month. Additionally, we note that these discounts are: (1) not progressively distributed towards lower-income households; (2) more pronounced in Manhattan and increasing in gentrifying areas; and (3) double for households correctly aware of the policy. The aggregate rent discounts range between $4 and $5.4 billion annually, representing 10%–14% of the federal budget for means-tested housing programs. While White tenants received larger rent discounts in the 2000s, racial disparities in these discounts have largely diminished since 2011, consistent with patterns in spatial sorting and gentrification.

Suggested Citation

  • Chen, Ruoyu & Jiang, Hanchen & Quintero, Luis E., 2023. "Measuring the value of rent stabilization and understanding its implications for racial inequality: Evidence from New York City," Regional Science and Urban Economics, Elsevier, vol. 103(C).
    • Handle: RePEc:eee:regeco:v:103:y:2023:i:c:s0166046223000832
    DOI: 10.1016/j.regsciurbeco.2023.103948
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0166046223000832
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.regsciurbeco.2023.103948?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Richard K. Crump & V. Joseph Hotz & Guido W. Imbens & Oscar A. Mitnik, 2009. "Dealing with limited overlap in estimation of average treatment effects," Biometrika, Biometrika Trust, vol. 96(1), pages 187-199.
    2. Barzel, Yoram, 1974. "A Theory of Rationing by Waiting," Journal of Law and Economics, University of Chicago Press, vol. 17(1), pages 73-95, April.
    3. Hanson, Andrew & Hawley, Zackary, 2011. "Do landlords discriminate in the rental housing market? Evidence from an internet field experiment in US cities," Journal of Urban Economics, Elsevier, vol. 70(2-3), pages 99-114, September.
    4. 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.
    5. 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.
    6. Martha J. Bailey & Andrew Goodman-Bacon, 2015. "The War on Poverty's Experiment in Public Medicine: Community Health Centers and the Mortality of Older Americans," American Economic Review, American Economic Association, vol. 105(3), pages 1067-1104, March.
    7. Guillaume Chapelle & Etienne Wasmer & Pierre-Henri Bono, 2019. "Spatial Misallocation and Rent Controls," AEA Papers and Proceedings, American Economic Association, vol. 109, pages 389-392, May.
    8. Michael Ewens & Bryan Tomlin & Liang Choon Wang, 2014. "Statistical Discrimination or Prejudice? A Large Sample Field Experiment," The Review of Economics and Statistics, MIT Press, vol. 96(1), pages 119-134, March.
    9. Case, Karl E & Shiller, Robert J, 1989. "The Efficiency of the Market for Single-Family Homes," American Economic Review, American Economic Association, vol. 79(1), pages 125-137, March.
    10. Blair Jenkins, 2009. "Rent Control: Do Economists Agree?," Econ Journal Watch, Econ Journal Watch, vol. 6(1), pages 73-112, January.
    11. Svarer, Michael & Rosholm, Michael & Munch, Jakob Roland, 2005. "Rent control and unemployment duration," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2165-2181, December.
    12. Myers, Caitlin Knowles, 2004. "Discrimination and neighborhood effects: understanding racial differentials in US housing prices," Journal of Urban Economics, Elsevier, vol. 56(2), pages 279-302, September.
    13. Jack Favilukis & Pierre Mabille & Stijn Van Nieuwerburgh, 2023. "Affordable Housing and City Welfare," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 90(1), pages 293-330.
    14. Peter Christensen & Ignacio Sarmiento-Barbieri & Christopher Timmins, 2022. "Housing Discrimination and the Toxics Exposure Gap in the United States: Evidence from the Rental Market," The Review of Economics and Statistics, MIT Press, vol. 104(4), pages 807-818, October.
    15. Moon, Choon-Geol & Stotsky, Janet G, 1993. "The Effect of Rent Control on Housing Quality Change: A Longitudinal Analysis," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 1114-1148, December.
    16. Richard Arnott, 1995. "Time for Revisionism on Rent Control?," Journal of Economic Perspectives, American Economic Association, vol. 9(1), pages 99-120, Winter.
    17. Denton Marks, 1984. "The Effect of Rent Control on the Price of Rental Housing: An Hedonic Approach," Land Economics, University of Wisconsin Press, vol. 60(1), pages 81-94.
    18. Athey, Susan & Imbens, Guido W., 2019. "Machine Learning Methods Economists Should Know About," Research Papers 3776, Stanford University, Graduate School of Business.
    19. Kenneth R. Ahern & Marco Giacoletti, 2022. "Robbing Peter to Pay Paul? The Redistribution of Wealth Caused by Rent Control," NBER Working Papers 30083, National Bureau of Economic Research, Inc.
    20. Early, Dirk W., 2000. "Rent Control, Rental Housing Supply, and the Distribution of Tenant Benefits," Journal of Urban Economics, Elsevier, vol. 48(2), pages 185-204, September.
    21. Robert Collinson & Ingrid Gould Ellen & Jens Ludwig, 2015. "Low-Income Housing Policy," NBER Chapters, in: Economics of Means-Tested Transfer Programs in the United States, Volume 2, pages 59-126, National Bureau of Economic Research, Inc.
    22. Rebecca Diamond & Tim McQuade & Franklin Qian, 2019. "The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality: Evidence from San Francisco," American Economic Review, American Economic Association, vol. 109(9), pages 3365-3394, September.
    23. 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.
    24. Phillips, David C., 2017. "Landlords avoid tenants who pay with vouchers," Economics Letters, Elsevier, vol. 151(C), pages 48-52.
    25. Sieg, Holger & Smith, V. Kerry & Banzhaf, H. Spencer & Walsh, Randy, 2002. "Interjurisdictional housing prices in locational equilibrium," Journal of Urban Economics, Elsevier, vol. 52(1), pages 131-153, July.
    26. Susan Athey & Guido W. Imbens, 2019. "Machine Learning Methods That Economists Should Know About," Annual Review of Economics, Annual Reviews, vol. 11(1), pages 685-725, August.
    27. Petra E. Todd & Kenneth I. Wolpin, 2003. "On The Specification and Estimation of The Production Function for Cognitive Achievement," Economic Journal, Royal Economic Society, vol. 113(485), pages 3-33, February.
    28. 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.
    29. Gyourko, Joseph & Linneman, Peter, 1989. "Equity and efficiency aspects of rent control: An empirical study of New York City," Journal of Urban Economics, Elsevier, vol. 26(1), pages 54-74, July.
    30. Alston, Richard M & Kearl, J R & Vaughan, Michael B, 1992. "Is There a Consensus among Economists in the 1990's?," American Economic Review, American Economic Association, vol. 82(2), pages 203-209, May.
    31. Edgar O. Olsen, 2003. "Housing Programs for Low-Income Households," NBER Chapters, in: Means-Tested Transfer Programs in the United States, pages 365-442, National Bureau of Economic Research, Inc.
    32. Brent W. Ambrose & N. Edward Coulson & Jiro Yoshida, 2015. "The Repeat Rent Index," The Review of Economics and Statistics, MIT Press, vol. 97(5), pages 939-950, December.
    33. Linneman, Peter, 1987. "The effect of rent control on the distribution of income among New York City renters," Journal of Urban Economics, Elsevier, vol. 22(1), pages 14-34, July.
    34. Sims David P, 2011. "Rent Control Rationing and Community Composition: Evidence from Massachusetts," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-30, May.
    35. Eichholtz, Piet & Straetmans, Stefan & Theebe, Marcel, 2012. "The Amsterdam rent index: The housing market and the economy, 1550–1850," Journal of Housing Economics, Elsevier, vol. 21(4), pages 269-282.
    36. Olsen, Edgar O, 1972. "An Econometric Analysis of Rent Control," Journal of Political Economy, University of Chicago Press, vol. 80(6), pages 1081-1100, Nov.-Dec..
    37. Edward L. Glaeser, 1996. "The Social Costs of Rent Control Revisted," Harvard Institute of Economic Research Working Papers 1747, Harvard - Institute of Economic Research.
    38. Breidenbach, Philipp & Eilers, Lea & Fries, Jan, 2022. "Temporal dynamics of rent regulations – The case of the German rent control," Regional Science and Urban Economics, Elsevier, vol. 92(C).
    39. 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.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Konstantin A. Kholodilin, 2022. "Rent Control Effects through the Lens of Empirical Research," DIW Roundup: Politik im Fokus 139, DIW Berlin, German Institute for Economic Research.
    2. 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.
    3. Mense, Andreas & Michelsen, Claus & Kholodilin, Konstantin A., 2023. "Rent Control, Market Segmentation, and Misallocation: Causal Evidence from a Large-Scale Policy Intervention," Journal of Urban Economics, Elsevier, vol. 134(C).
    4. Blair Jenkins, 2009. "Rent Control: Do Economists Agree?," Econ Journal Watch, Econ Journal Watch, vol. 6(1), pages 73-112, January.
    5. Sims David P, 2011. "Rent Control Rationing and Community Composition: Evidence from Massachusetts," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-30, May.
    6. Miguel-Ángel López García, 2023. "Controles de alquileres," Hacienda Pública Española / Review of Public Economics, IEF, vol. 246(3), pages 165-206, September.
    7. 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.
    8. Joan Monras & Jose G. Montalvo, 2023. "The Effect of Second-Generation Rent Controls: New Evidence from Catalonia," Working Paper Series 2023-28, Federal Reserve Bank of San Francisco.
    9. Enström Öst, Cecilia & Söderberg, Bo & Wilhelmsson, Mats, 2014. "Household allocation and spatial distribution in a market under (“soft”) rent control," Journal of Policy Modeling, Elsevier, vol. 36(2), pages 353-372.
    10. Coffey, Cathal & Hogan, Paul J. & McQuinn, Kieran & O'Toole, Conor & Slaymaker, Rachel, 2022. "Rental inflation and stabilisation policies: international evidence and the Irish experience," Research Series, Economic and Social Research Institute (ESRI), number RS136, August.
    11. Morten Skak & Gintautas Bloze, 2013. "Rent Control and Misallocation," Urban Studies, Urban Studies Journal Limited, vol. 50(10), pages 1988-2005, August.
    12. Ligia Topan & Miguel Jerez & Sonia Sotoca, 2020. "The impact of oil prices on products groups inflation: is the effect asymmetric?," Documentos de Trabajo del ICAE 2020-02, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico.
    13. Joan Monràs & José Garcia Montalvo, 2021. "The effect of second generation rent controls: New evidence from Catalonia," Economics Working Papers 1836, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 2022.
    14. Konstantin A. Kholodilin & Andreas Mense & Claus Michelsen, 2016. "Market Break or Simply Fake? Empirics on the Causal Effects of Rent Controls in Germany," Discussion Papers of DIW Berlin 1584, DIW Berlin, German Institute for Economic Research.
    15. Christian A. L. Hilber & Olivier Schoni, 2022. "Housing policy and affordable housing," CEP Occasional Papers 56, Centre for Economic Performance, LSE.
    16. Zheng, Diehang & Deng, Yongheng & Gordon, Peter & Dale-Johnson, David, 2007. "An examination of the impact of rent control on mobile home prices in California," Journal of Housing Economics, Elsevier, vol. 16(2), pages 209-242, June.
    17. 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.
    18. Breidenbach, Philipp & Eilers, Lea & Fries, Jan, 2022. "Temporal dynamics of rent regulations – The case of the German rent control," Regional Science and Urban Economics, Elsevier, vol. 92(C).
    19. Weber, Jan Philip & Lee, Gabriel, . "On the Measure of Private Rental Market Regulation Index and its Effect on Housing Rents: Cross Country Evidence," Beiträge zur Immobilienwirtschaft, University of Regensburg, Department of Economics, number 21.
    20. Rebecca Diamond & Tim McQuade & Franklin Qian, 2019. "The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality: Evidence from San Francisco," American Economic Review, American Economic Association, vol. 109(9), pages 3365-3394, September.

    More about this item

    Keywords

    Rent regulation; Rent stabilization; Rent control; Racial inequality; Gentrification;
    All these keywords.

    JEL classification:

    • R28 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Government Policy
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:regeco:v:103:y:2023:i:c:s0166046223000832. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/regec .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.