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Effectiveness and supply effects of high-coverage rent control policies

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  • Jofre-Monseny, Jordi
  • Martínez-Mazza, Rodrigo
  • Segú, Mariona

Abstract

Concerns about housing affordability are widespread in cities worldwide, prompting discussions about rent control policies. This paper studies the effects of a rent control policy adopted in Catalonia in 2020 that applied to some but not all municipalities. The policy virtually covered all the rental market and forced ads and tenancy agreements to specify the applicable rent cap to ensure enforcement. To identify the causal effect of the rent control regulation on the rental market, we exploit register microdata of tenancy agreements and implement difference-in-differences regressions and event-study designs. Our results indicate that the regulation reduced average rents paid by about 4% to 6%. We do not find evidence of a reduction in the supply of rental units, as measured by the number of signed and ended agreements or the active stock of rental units. We implement several robustness tests to address identification concerns related to Covid-19. Our results suggest that rent control policies can effectively reduce rental prices without necessarily shrinking the rental market.

Suggested Citation

  • Jofre-Monseny, Jordi & Martínez-Mazza, Rodrigo & Segú, Mariona, 2023. "Effectiveness and supply effects of high-coverage rent control policies," Regional Science and Urban Economics, Elsevier, vol. 101(C).
  • Handle: RePEc:eee:regeco:v:101:y:2023:i:c:s0166046223000510
    DOI: 10.1016/j.regsciurbeco.2023.103916
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    References listed on IDEAS

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    1. 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.
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    4. 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.
    5. Garcia-López, Miquel-Àngel & Jofre-Monseny, Jordi & Martínez-Mazza, Rodrigo & Segú, Mariona, 2020. "Do short-term rental platforms affect housing markets? Evidence from Airbnb in Barcelona," Journal of Urban Economics, Elsevier, vol. 119(C).
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    7. 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).
    8. 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.
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    11. Gupta, Arpit & Mittal, Vrinda & Peeters, Jonas & Van Nieuwerburgh, Stijn, 2022. "Flattening the curve: Pandemic-Induced revaluation of urban real estate," Journal of Financial Economics, Elsevier, vol. 146(2), pages 594-636.
    12. Batalha, Mafalda & Gonçalves, Duarte & Peralta, Susana & Pereira dos Santos, João, 2022. "The virus that devastated tourism: The impact of covid-19 on the housing market," Regional Science and Urban Economics, Elsevier, vol. 95(C).
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    Cited by:

    1. Lorenzo Vidal & Javier Gil & Miguel A Martínez, 2024. "Accommodating ‘generation rent’: Unsettling dominant discourses on rental housing reform in Catalonia and Spain," Urban Studies, Urban Studies Journal Limited, vol. 61(11), pages 2060-2079, August.

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    More about this item

    Keywords

    Rent control; Housing; Public policy evaluation; Event study;
    All these keywords.

    JEL classification:

    • R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General

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