The Price of Regulatory Risk in Housing Markets: Evidence from Berlin

Mathias Dolls (), Clemens Fuest (), David Gstrein, Carla Krolage and Florian Neumeier ()

No 12851, CESifo Working Paper Series from CESifo

Abstract: We study how regulatory risk affects housing markets in the aftermath of rent control. Our setting is Berlin, where a stringent rent cap introduced in 2020 was repealed in 2021, but was followed by continued political debate over expropriation of housing companies and further intervention. Using micro-level listing data and a hedonic difference-in-differences design comparing Berlin to other major German cities, we show that Berlin’s price-rent ratio remained 10–15 percent below its pre-intervention trend three years after repeal. To interpret this persistence, we develop a simple model in which institutional investors face greater exposure to future regulation. The model predicts lower asset prices, reduced institutional ownership, and partial crowding-in of private investors. Consistent with these predictions, we document a sharp rise in housing policy uncertainty after repeal and show that large housing companies reduced their Berlin portfolios, accepted lower sale prices, and sharply cut construction activity. The results imply that credible threats of future intervention can depress housing valuations and reshape market structure even in the absence of binding regulation.

Keywords: housing markets; rent regulation; policy uncertainty; asset pricing; institutional investors; property rights (search for similar items in EconPapers)
JEL-codes: D84 G12 H13 P48 R31 R38 (search for similar items in EconPapers)
Date: 2026
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