Rent Control as a Revenue Constraint: Theory and Evidence

This paper contains derivations of hypotheses from models of partial rent control for the firm in the very short run, the firm and the market in the short run, and the market in the long run, all of which assume rent control as a revenue constraint. It surveys empirical analyses and compares those results to the theoretical hypotheses. The findings confirm the following theoretical hypotheses for the controlled sector: Rent control produces a tenant subsidy, causes landlord under-maintenance, decreases the rental price of housing, decreases the asset price of housing, decreases the quantity supplied of new and upgraded housing, and decreases the stock of housing. For the uncontrolled sector, the findings confirm the following theoretical hypotheses for two scenarios: (1) the excess demand for housing in the controlled sector flows into the uncontrolled sector, raising the rental price of housing; (2) the actions taken by landlords due to the risk of rent control being imposed on them increases the rental price of housing, decreases the asset price of housing, decreases the quantity supplied of new and upgraded housing, and decreases the stock of housing. There exists no comparable analysis in the rent-control literature.