Forward to the Past: Short-Term Effects of the Rent Freeze in Berlin

45 Pages Posted: 1 Feb 2021

See all articles by Anja M. Hahn

Anja M. Hahn

affiliation not provided to SSRN

Konstantin A. Kholodilin

German Institute for Economic Research (DIW Berlin)

Sofie R. Waltl

Luxembourg Institute of Socio-Economic Research (LISER); Vienna University of Economics and Business

Date Written: January 2021

Abstract

In 2020, Berlin enacted a rigorous rent-control policy: the “Mietendeckel” (rent freeze), aiming to stop rapidly growing rental prices. We evaluate this newly enacted but old-fashionably designed policy by analyzing its immediate supply-side effects. Using a rich pool of rent advertisements reporting asking rents and comprehensive dwelling characteristics, we perform hedonic-style Difference-in-Difference analyses comparing trajectories of dwellings inside and outside the policy’s scope. We find no immediate effect upon announcement of the policy. Yet advertised rents drop significantly upon the policy’s enactment. Additionally, we document a substitution effect affecting the rental markets of Berlin’s (unregulated) satellite city Potsdam and adjacent smaller municipalities. On top, the supplemental quantity analyses reveal a stark reduction of the number of advertised rental units hampering a successful housing search for newcomers, (young) first-time renters and tenants aiming for a different housing opportunity.

Keywords: First-generation rent control, rent freeze, urban policy, rent price, supply disruptions, Berlin

JEL Classification: C14,C43,O18

Suggested Citation

Hahn, Anja M. and Kholodilin, Konstantin A. and Waltl, Sofie R., Forward to the Past: Short-Term Effects of the Rent Freeze in Berlin (January 2021). DIW Berlin Discussion Paper No. 1928, Available at SSRN: https://ssrn.com/abstract=3775507

Anja M. Hahn

affiliation not provided to SSRN

Konstantin A. Kholodilin (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Sofie R. Waltl

Luxembourg Institute of Socio-Economic Research (LISER) ( email )

11, Porte des Sciences
Campus Belval – Maison des Sciences Humaines
Esch-sur-Alzette, L-4366
Luxembourg

HOME PAGE: http://www.liser.lu

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

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