Measuring the Value of Rent Stabilization and Understanding its Implications for Racial Inequality: Evidence from New York City

136 Pages Posted: 11 Apr 2022 Last revised: 26 Sep 2023

See all articles by Ruoyu Chen

Ruoyu Chen

George Washington University

Hanchen Jiang

University of North Texas - Department of Economics

Luis Quintero

Johns Hopkins University - Carey Business School

Abstract

Despite a rekindled public interest in rent stabilization amidst the housing affordability crisis, evidence of the magnitude and distribution of the benefits offered by this policy is lacking. Measuring the policy's benefits is challenging because the counterfactual unregulated rents of rent-stabilized housing units are not observed. This paper estimates quality-adjusted rent discounts for each rent-stabilized unit in New York City (NYC) from 2002 to 2017. We validate our model's out-of-sample prediction power using a machine learning method, improve comparability between unregulated and stabilized units using propensity scores, and control for unobservable housing quality using a repeat-rent approach with a panel of de-regulated units. We find an average rent discount of $410 per month and show that rent discounts are: (1) not progressively distributed towards lower-income households; (2) larger in Manhattan and increasing in gentrifying neighborhoods; and (3) twice as large for households correctly aware of being beneficiaries of the policy. The aggregate rent discounts for the entire NYC are between $4 and $5.4 billion per year, roughly 10%-14% of the federal budget on means-tested housing programs. We find that although rent stabilization disproportionately benefited White tenants in the 2000s, the racial gaps in rent discounts between White and minority tenants have shrunk or disappeared since 2011. We provide evidence that these patterns are consistent with spatial sorting and gentrification in neighborhoods with large shares of minority tenants.

Keywords: Rent Regulation, Rent Stabilization, Rent Control, Hedonic Pricing, Racial Inequality, Gentrification

JEL Classification: R28, J15, H75, L51

Suggested Citation

Chen, Ruoyu and Jiang, Hanchen and Quintero, Luis, Measuring the Value of Rent Stabilization and Understanding its Implications for Racial Inequality: Evidence from New York City. Available at SSRN: https://ssrn.com/abstract=4077292 or http://dx.doi.org/10.2139/ssrn.4077292

Ruoyu Chen

George Washington University ( email )

Washington, DC 20052
United States

HOME PAGE: http://stevenrychen.com

Hanchen Jiang

University of North Texas - Department of Economics ( email )

Denton, TX 76203-1457
United States

Luis Quintero (Contact Author)

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

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