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

92 Pages Posted: 27 Mar 2022 Last revised: 23 May 2022

See all articles by Kenneth R. Ahern

Kenneth R. Ahern

University of Southern California - Marshall School of Business; National Bureau of Economic Research (NBER)

Marco Giacoletti

Marshall School of Business

Date Written: May 19, 2022

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 by 6-7%, for an aggregate loss of $1.6 billion. A calibrated model of house prices under rent control attributes a third of these losses to indirect, negative externalities. Second, leveraging administrative parcel-level data, we find that the tenants who gained the most from rent control had higher incomes and were more likely to be white, while the owners who lost the most had lower incomes and were more likely to be minorities. For properties with high-income owners and low-income tenants, the transfer of wealth was close to zero. Thus, to the extent that rent control is intended to transfer wealth from high-income to low-income households, the realized impact of the law was the opposite of its intention.

Keywords: Rent control, real estate valuation, wealth transfers

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

Suggested Citation

Ahern, Kenneth Robinson and Giacoletti, Marco, Robbing Peter to Pay Paul? The Redistribution of Wealth Caused by Rent Control (May 19, 2022). Available at SSRN: https://ssrn.com/abstract=4061315 or http://dx.doi.org/10.2139/ssrn.4061315

Kenneth Robinson Ahern (Contact Author)

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA California 90089
United States

HOME PAGE: http://www-bcf.usc.edu/~kahern/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Marco Giacoletti

Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA California 90089
United States

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