16_Rent Control: Empirical Evidence Flashcards
What was the focus of Diamond, McQuade, and Qian’s (2019) study?
They studied the effects of a rent control expansion in San Francisco by comparing buildings that were subjected to new rent control policies with those that were not.
What were the treatment and control groups in the DMQ (2019) study?
Treatment: 2-4 unit buildings built before 1980 (added to rent control)
Control: 2-4 unit buildings built between 1980-1990 (not under rent control)
How did rent control affect tenant stay rates in San Francisco?
Tenants in rent-controlled units were more likely to stay in their units, reducing displacement.
How did landlords respond to rent control according to DMQ (2019)?
Landlords reduced rental housing supplies by 15% by selling to owner-occupants or redeveloping buildings.
What was the long-term effect of rent control on non-controlled units?
Over time, rent control led to a reduction in rental inventory, causing an increase in rents for non-controlled units.
According to DMQ (2019), who were the winners and losers of rent control?
Winners: Tenants in rent-controlled units
Losers: Tenants in uncontrolled units, Tenants pushed out by landlords, New arrivals to the city, Potential future residents
How does a competitive housing market differ from a monopolistic one?
Competitive Market: Rent is determined by supply and demand at equilibrium.
Monopolistic Market: Developers restrict supply to keep prices high, leading to underproduction of housing.
What happens in a monopolistic housing market regarding deadweight loss?
The monopolist under-produces housing, leading to inefficiency (deadweight loss), reducing total social welfare.
How can rent control impact a monopolistic housing market?
Rent control can potentially reduce deadweight loss by increasing output and lowering prices.
Why does rent control discourage new construction?
It interferes with the market signal of housing scarcity, dampens supply response, and creates uncertainty for developers.
What is the stock-flow model in the housing market?
Stock: The total quantity of housing available.
Flow: The new housing units added to the market.
Rent is determined by the interaction between demand and the existing housing stock.
What happens when rent ceilings are lowered?
A more aggressive rent ceiling reduces housing shortages but still limits supply.
rent control advantages
- Large benefits to tenants in rent controlled unit in the form of lower rents
- Does not require subsidies (and raising government revenue)
- May reach many more households than gov’t subsidies or zoning change
- Monopolistic Competition: pushes rents down and expands quantity supplied
Rent Control disadvantages
- Reduced incentive for building maintenance
- Increase in rents in non-controlled inventory:
- Through reduced new construction
- Landlords looking to escape regulation
- Misallocation of households to dwellings
