The Effect of Rent Controls along the 'Excess' Price Distribution

Joan Monras and García-Montalvo, José

No 20018, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Catalonia enacted a rental cap policy that affected only some municipalities and, within those, only units with prices above their "reference" price. We show that, as intended, the policy led to a reduction in rental prices, but with price increases at the bottom and price declines at the top of the distribution. The policy also affected supply, with exit at the top which was not compensated by entry at the bottom. We show that a model with quality differences in rental units rationalizes the empirical facts and allows us to compute the welfare consequences of an (increasingly popular) policy that was designed as a short-term remedy to a tight rental market.

Date: 2025-03
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