Speculative housing markets and rent control: insights from nonlinear economic dynamics

Noemi Schmitt and Frank Westerhoff
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Noemi Schmitt: University of Bamberg

Journal of Economic Interaction and Coordination, 2022, vol. 17, issue 1, No 8, 163 pages

Abstract: Abstract We propose a novel housing market model to explore the effectiveness of rent control. Our model reveals that the expectation formation and learning behavior of boundedly rational homebuyers, switching between extrapolative and regressive expectation rules subject to their past forecasting accuracy, may create endogenous housing market dynamics. We show that policymakers may use rent control to reduce the rent level, although such policies may have undesirable effects on the house price and the housing stock. However, we are also able to prove that well-designed rent control may help policymakers to stabilize housing market dynamics, even without creating housing market distortions.

Keywords: Housing market dynamics; Expectation formation and learning behavior; Rent control; Steady state; stability and out-of-equilibrium analysis (search for similar items in EconPapers)
JEL-codes: D84 G12 R21 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s11403-020-00312-3

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