The Effects of a Simple Rent Control Scheme in a Competitive Housing Market.

by Edgar O. Olsen


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The purpose of this paper is to show that the assumptions of Muth's theory of the housing market imply that a simple rent control program results in a decrease in the quantity of housing service consumed in the long run. In the short run, rent control hastens deterioration of rent controlled housing, and, hence, worsens the housing occupied by the tenants of these dwellings. It is further deduced that rent control subsidizes the consumption of nonhousing goods by tenants of rent controlled units at the expense of the owners of these units. In the long run, rent control does not affect the consumption of any good by anybody because all units would, in time, become uncontrolled and we would return to the situation prior to rent control. Finally, it is demonstrated that under conditions of price stability the value of rent control to the tenant declines as time passes.

This report is part of the RAND Corporation Paper series. The paper was a product of the RAND Corporation from 1948 to 2003 that captured speeches, memorials, and derivative research, usually prepared on authors' own time and meant to be the scholarly or scientific contribution of individual authors to their professional fields. Papers were less formal than reports and did not require rigorous peer review.

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