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The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality: Evidence from San Francisco

Rebecca Diamond, Franklin Zongjin Qian and Timothy McQuade
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Timothy McQuade: Stanford University

No 918, 2018 Meeting Papers from Society for Economic Dynamics

Abstract: In this paper, we exploit quasi-experimental variation in the assignment of rent control in San Francisco to study its impacts on tenants, landlords, and the rental market as a whole. Leveraging new micro data which tracks an individual's migration over time, we find that rent control increased the probability a renter stayed at their address by close to 20 percent. At the same time, we find that landlords whose properties were exogenously covered by rent control reduced their supply of available rental housing by 15\%, by either converting to condos/TICs, selling to owner occupied, or redeveloping buildings. This led to a city-wide rent increase of 5.1% and caused $2.9 billion of total loss to renters. We develop a dynamic, structural model of neighborhood choice to evaluate the welfare impacts of our reduced form effects. We find that rent control offered large benefits to impacted tenants during the 1995-2012 period, averaging between $2300 and $6600 per person each year, with the present discounted value of aggregate benefits totaling $2.9 billion. The substantial welfare losses due to decreased housing supply could be mitigated if insurance against large rent increases was provided as a form of government social insurance, instead of a regulated mandate on landlords.

Date: 2018
New Economics Papers: this item is included in nep-ure
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https://economicdynamics.org/meetpapers/2018/paper_918.pdf (application/pdf)

Related works:
Journal Article: The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality: Evidence from San Francisco (2019) Downloads
Working Paper: The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality: Evidence from San Francisco (2018) Downloads
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