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Rent Control, Market Segmentation, and Misallocation: Causal Evidence from a Large-Scale Policy Intervention

Referierte Aufsätze Web of Science

Andreas Mense, Claus Michelsen, Konstantin A. Kholodilin

In: Journal of Urban Economics 134 (2023), 103513, 22 S.


This paper studies market segmentation that arises from the introduction of rent control. When a part of the market remains unregulated, theory predicts an increase of free-market rents due to the misallocation of households to dwellings. To document this mechanism empirically, we study a large-scale policy intervention in the German housing market. We isolate the misallocation mechanism by exploiting temporal variation in treatment dates in an event study design. We find a robust positive spillover effect of rent control on free-market rents. Moreover, mobility of renters living in rent-controlled units decreased.

Konstantin A. Kholodilin

Research Associate in the Macroeconomics Department

JEL-Classification: D4;R31;R21
Keywords: Misallocation, price controls, rent control, spillovers

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