The Misallocation of Housing Under Rent Control

52 Pages Posted: 14 Jun 2000 Last revised: 6 Oct 2010

See all articles by Edward L. Glaeser

Edward L. Glaeser

Harvard University - Department of Economics; Brookings Institution; National Bureau of Economic Research (NBER)

Erzo F. P. Luttmer

Dartmouth College; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Date Written: October 1997

Abstract

When there are binding price controls, there are shortages and the allocation of goods across consumers may not be efficient. In general, the misallocation costs of price controls are first order, while the classic welfare losses due to undersupply are second order. This paper presents an empirical methodology for estimating the degree of misallocation of housing units due to rent control in New York City. This methodology involves comparing the relative consumption of different demographic groups within the rent controlled area with the relative levels of consumption in a free market area. Our best estimate of the costs of rent control in New York due to the misallocation of rental apartments is 200 dollars per apartment annually.

Suggested Citation

Glaeser, Edward L. and Luttmer, Erzo F.P., The Misallocation of Housing Under Rent Control (October 1997). NBER Working Paper No. w6220. Available at SSRN: https://ssrn.com/abstract=225978

Edward L. Glaeser (Contact Author)

Harvard University - Department of Economics ( email )

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Erzo F.P. Luttmer

Dartmouth College ( email )

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National Bureau of Economic Research (NBER)

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IZA Institute of Labor Economics

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