Robbing Peter to Pay Paul? The Redistribution of Wealth Caused by Rent Control

Abstract

We use the price effects caused by the passage of rent control in St. Paul, Minnesota in 2021, to study the transfer of wealth across income groups. First, we find that rent control caused property values to fall sharply. A calibrated model of rent control attributes a third of these losses to indirect, negative externalities. Second, leveraging administrative parcel-level data, we find that tenants who gained more from rent control had higher incomes. Thus, to the extent that rent control is intended to benefit low-income households, the realized impact of the law was not consistent with its intention.

Keywords: Rent control, real estate valuation, wealth transfers

JEL Classification: D61, D62, G51, H23, R23, R31, R32, R38