Freakonomics Radio Why Rent Control Doesn’t Work (Ep. 373 Rebroadcast)
Mar 12, 2020
Rebecca Diamond, a Stanford economist focused on rent control effects, joins Ed Glaeser, a Harvard expert in city economics, to dissect the complexities of rent control. They argue that while rent control seems beneficial for some renters, it actually leads to artificially high rents and discourages new construction. The duo analyzes the political landscape surrounding these policies and explores the severe housing shortages it creates in cities like Stockholm, revealing a black market for housing as a direct consequence.
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Rent Control: A Historical Perspective
- Rent control, initially implemented for fairness during World War II, has become a contentious issue in expensive cities.
- Economists generally view it negatively, while others see it as a necessary tool to prevent displacement.
Inefficient Space Allocation
- Ed Glaeser recounts a story of a tobacconist living in a large, rent-controlled apartment he rarely uses.
- This highlights the inefficient allocation of space under rent control, where individuals occupy apartments larger than their needs.
Data-Driven Insights on Rent Control
- Traditional economic theory makes predictions about rent control, but lacks data on individual renter mobility.
- Rebecca Diamond's research uses administrative data tracking address histories to address this gap.