Priced-Out: Rent Control, Wages, and Inequality

Abstract

Employing a quasi-natural experiment, we show that after losing rent control, low-income workers' earnings decline significantly, while high-income workers remain unaffected, even as both are equally likely to relocate to city outskirts, and pay higher rents. The wage decline stems from transition to worse quality jobs in firms located in the city outskirts. New occupants of formerly rent-controlled apartments have higher income, tend to purchase the units, and experience wage shocks prior, but not after relocation. Our evidence suggests that, after losing rent control, low-income workers cannot afford commuting costs to higher-paying jobs. More efficient public transportation may accomplish similar labor outcomes than rent control.

Keywords: Rent control, wages, inequality, labor markets, housing affordability, public transportation, migration

JEL Classification: J21, J22, J24, J31, J61, R23, R31, R41, R48