Who Benefits from Rent Control? Socio-Economic Determinants of the Rent Subsidy

35 Pages Posted: 9 Feb 2022

See all articles by Herman Donner

Herman Donner

Stanford Graduate School of Business

Fredrik Kopsch

Lund University

Date Written: December 10, 2021

Abstract

A common aim of rent control is to assist low-income households. We test the income-distributional effects of rent control with a novel dataset that includes characteristics of those who received rent-controlled apartments between 2011 and 2016 in central Stockholm, Sweden, through a centrally managed queue of apartments from both public and private landlords.

To quantify the rent subsidy, we estimate hypothetical market rents by the owner-occupied market as a point of deviation. We find that the average rental apartment has a rent that is considerably below market clearing level, with an average monthly rent subsidy of 4,338 SEK ($502).

From an income-distributional perspective, we find several regressive effects. Individuals who receive rent-controlled apartments have incomes that are on average 30% higher than the metropolitan area average. Within this group, we find that rental apartments in the highest quantile of the subsidy have older tenants with substantially higher incomes compared to tenants who receive less subsidized apartments. The regressive effect is driven by high earners affording higher rents (renting larger apartments) and being able to wait longer in queue. The most subsidized apartments have tenants that are on average 13 years older than the least subsidized ones.

Controlling for time in queue, we find that renters in the highest quantile of annual income (who on average make 836,008 SEK/$96,648) receive monthly rent subsidies that are 1,034 SEK ($120) higher than renters in the lowest quantile of income (who on average make (250,802 SEK/$28,994). The average monthly rent subsidy for all rental apartments is 4212 SEK/$486.

Keywords: Rent Control, Housing Policy, Box-Cox, Housing Affordability

JEL Classification: R31, D61

Suggested Citation

Donner, Herman and Kopsch, Fredrik, Who Benefits from Rent Control? Socio-Economic Determinants of the Rent Subsidy (December 10, 2021). Available at SSRN: https://ssrn.com/abstract=4022531 or http://dx.doi.org/10.2139/ssrn.4022531

Herman Donner (Contact Author)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, 94305
United States

Fredrik Kopsch

Lund University ( email )

Box 117
Lund, SC Skane S221 00
Sweden

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