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Rent Regulations' Pricing Effect in the Uncontrolled Sector: An Empirical Investigation

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  • Dirk Early
  • Jon Phelps

Abstract

Rent controls, designed to lower the cost of housing for renters, may have the perverse effect of increasing rents for tenants in the unregulated sector. Although new construction is exempt from current rent control laws, a reduction in supply of rental housing will occur if investors are wary of future controls affecting their units. Also, if controls reduce landlord maintenance, total housing supply in a market will fall. Using 1984 to 1996 data from the American Housing Survey, this study examines the role of rent controls in determining the variations in prices of uncontrolled rental housing across metropolitan areas.The results suggest a positive and statistically significant relationship between the introduction of rent control and price in the uncontrolled sector. However, the link between controls and prices declines through time and may completely disappear after 20 to 30 years with no new construction subject to controls.

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  • Dirk Early & Jon Phelps, 1999. "Rent Regulations' Pricing Effect in the Uncontrolled Sector: An Empirical Investigation," Journal of Housing Research, Taylor & Francis Journals, vol. 10(2), pages 267-285, January.
    • Handle: RePEc:taf:rjrhxx:v:10:y:1999:i:2:p:267-285
    DOI: 10.1080/10835547.1999.12091948
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