An income-distributional analysis of the rent control subsidy

Herman Donner, Fredrik Kopsch

Research output: Contribution to journalArticlepeer-review

Abstract

Rent control measures are typically in place to assist low-income households and decrease segregation. Yet, there is little empirical research on the social impact of such policies and specifically the role of how rent-controlled apartments are allocated. This study analyzes the income-distributional effects of rent control with a novel dataset that includes characteristics of those who received rent-controlled apartments between 2011 and 2016 in central Stockholm, Sweden. Specifically, this paper provides analysis of the impact of allocating apartments through a centrally managed queue with apartments from both public and private landlords. To quantify the rent subsidy, we estimate hypothetical market rents by taking the owner-occupied market as a point of deviation. We find a positive relationship between the rent subsidy and time in que. Apartments in the fourth quartile of subsidy require on average 21 years in que, while those in the first quartile require 10 years on average. There is considerably heterogeneity in the level of rent subsidy, and tenant income. Even as allocating through queuing should benefit high-income households less than allocation based on landlord preferences, we find several regressive effects. Controlling for time in queue, we find that tenants in the fourth quartile of annual income receive monthly rent subsidies that are substantially higher than renters in the first quartile of income. Similarly, rental apartments in the fourth quartile of the subsidy have older tenants with substantially higher incomes compared to less subsidized apartments. The regressive effect is driven by high earners renting larger apartments with larger absolute subsidies and being able to wait longer in queue.

Original languageEnglish
Pages (from-to)2729-2749
Number of pages21
JournalJournal of Housing and the Built Environment
Volume38
Issue number4
DOIs
Publication statusPublished - 2023 Dec

Subject classification (UKÄ)

  • Economics

Free keywords

  • Housing
  • Housing policy
  • Housing subsidies
  • Misallocation
  • Multi-family
  • Rent control

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