Rent control, expropriation risk and political uncertainty

Abstract: This paper examines the longer-run effects of rent control using a rich micro dataset of German apartment rents and purchase prices. Our empirical analysis exploits the introduction and subsequent abolition of a stringent rent cap in Berlin. While we find a drop in rents in the regulated segment and an increase in the unregulated segment while the regulation was in place, our results indicate a sustained increase in rents across both segments following the abolition of the rent cap. We attribute this to a supply side response to the increase in uncertainty on the local real estate market.

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Author: Responsible: Thomas Steger