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What Happens When You Do Away With Rent Control?

Stephen Smith points to new economic research highlighting the dramatic effect of rent control on the value of nearby properties. Hint: it keeps prices down <em>everywhere</em>.
July 3, 2012, 7am PDT | Ryan Lue
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As contentious a program as rent control often is, removing it may be a kiss of death of mixed-income neighborhoods, according to a study released last month. Economists at MIT examined property values over nearly two decades in a Cambridge, Mass. neighborhood, finding that scrapping rent control produced significant price appreciation, even in units that were never rent-controlled to begin with.

Andy Garin, a co-author of the paper, emphasizes that the team "went through great pains to make sure our results do, in fact, have a causal interpretation."

The paper's abstract concludes "that rent control's removal produced large, positive, and robust spillovers onto the price of never-controlled housing from nearby decontrolled units. Elimination of rent control added about $1.8 billion to the value of Cambridge's housing stock between 1994 and 2004, equal to nearly a quarter of total Cambridge residential price appreciation in this period. Positive spillovers to never-controlled properties account for more half of the induced price appreciation."

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Published on Friday, June 22, 2012 in Market Urbanism
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