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The Effects of Second-Generation Rent Control on Land Values

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Andreas Mense, Claus Michelsen, Konstantin A. Kholodilin

In: AEA Papers and Proceedings 109 (2019), S. 385-388


Second generation rent control seeks to prevent negative quantity effects by exempting newly built units. The artificially lowered rent in the controlled segment makes renting attractive for households that would otherwise not have rented in the market, replacing households with higher willingness to pay for housing. These households bid up prices in the free market segment, giving rise to an opposite-sign spillover from the controlled to the free market (Mense, Michelsen, and Kholodilin 2017). This paper documents a positive effect of "second generation" rent control on the value of vacant, buildable land.

Konstantin A. Kholodilin

Research Associate in the Macroeconomics Department

JEL-Classification: R31;R38