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Working Papers

November 1985, No. 85-5

The Effect of Second Generation Rent Controls on the Quality of Rental Housing

David L. Mengle

Microeconomic theory predicts that rent controls will lead to greater housing quality deterioration than would have been the case in an uncontrolled market. However, empirical analyses of rent control have concentrated on income distribution effects. This study tests the hypothesis of quality deterioration using a two period linked sample of dwelling units drawn from eight Standard Metropolitan Statistical Areas, half of which have rent control laws. The results indicate that quality was 7.1% lower in controlled markets in 1974, and 13.5% lower in 1977. Slow, cumulative effects of deferred maintenance may be responsible for the more pronounced 1977 results.

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