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  5. The Effects of Second-Generation Rent Control on Land Values

The Effects of Second-Generation Rent Control on Land Values

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Abstract

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.

Citation

Mense, Andreas, Claus Michelsen, and Konstantin A. Kholodilin. 2019. "The Effects of Second-Generation Rent Control on Land Values." AEA Papers and Proceedings, 109: 385-88. DOI: 10.1257/pandp.20191023

Additional Materials

JEL Classification

  • R31 Housing Supply and Markets
  • R38 Production Analysis and Firm Location: Government Policy