Does rent control increase rental returns? The case of the metropolitan housing market of Lille, France

Guillaume Toussaint and Arnaud Simon

ERES from European Real Estate Society (ERES)

Abstract: Rent control is a much talked-about measure in France. By 2026, rent control should be extended to all so-called “tensed” areas, where there is a structural shortage of housing supply in relation to high demand. Economic literature has extensively studied the effects of rent control, documenting a large number of positive and negative effects. However, to our knowledge, no paper has directly studied the effect of rent control on rental and capital returns. Using machine learning methods to appraise rental returns with 2 main databases, we estimate a difference in differences model to test the effect of rent control on rents, capital returns and rental returns. We show that the introduction of rent control in Lille, France, led to i) an increase in rents for the largest properties ii) a decrease in capital returns for all properties iii) an increase in rental returns for the largest one. Thus, we show that rent control led to lower housing capitalization rather than a general decline in rents or rental returns.

Keywords: Capital returns; Diff in Diff; Rent Control; Rental returns (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2025-01-01
New Economics Papers: this item is included in nep-eur
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