Measuring the Efficiency Cost of Rent Control

Donald F. Vitaliano

Real Estate Economics, 1986, vol. 14, issue 1, pages 61-71

Abstract: This paper estimates the burden of lost producer surplus imposed on landlords by rent control. The approach employed measures the reduction in Marshallian quasi-rent from the side of the derived demand for factors rather than the short-run supply of housing.A constant elasticity of substitution production function is employed to derive the input demand equation. The equation is estimated using post-war rent control data from five major New York State cities. It turns out that rent control reduced quasi-rent about 15%. The deadweight loss is estimated at 1.5% of gross rental payments or about 5% of net income before debt charges. Copyright American Real Estate and Urban Economics Association.

Date: 1986

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