Usually, cities with lots of vacant housing have slow rent growth (or low rents), while lower vacancy rates are associated with higher rents. But many Indian cities have an unusual, seemingly paradoxical problem: high vacancy rates and high rents. Why? According to research by Dr. Sahil Gandhi and Professor Richard Green, a major contributor is insecure property rights — specifically, very strict rent control regulations and an inadequate supply of judges to rule in tenant eviction cases. We discuss how policies that increase risk and reduce profits — beyond a certain point, anyway — can lead some landlords to keep their units vacant rather than rent them out, with negative consequences for the entire housing market. We also explore the differences between “first generation” and “second generation” rent controls, and the reasons many cities across the world have shifted from the former to the latter.

Show notes:

• Gandhi, S., Green, R. K., & Patranabis, S. (2022). Insecure property rights and the housing market: Explaining India’s housing vacancy paradox. Journal of Urban Economics, 131, 103490.
• Tandel, V., Patel, S., Gandhi, S., Pethe, A., & Agarwal, K. (2016). Decline of rental housing in India: The case of Mumbai. Environment and Urbanization, 28(1), 259-274.
• Diamond, R., McQuade, T., & Qian, F. (2019). The effects of rent control expansion on tenants, landlords, and inequality: Evidence from San Francisco. American Economic Review, 109(9), 3365-94.
• Phillips, S. (2020). Does the Los Angeles region have too many vacant homes? UCLA Lewis Center for Regional Policy Studies.
• Arnott, R. (1995). Time for revisionism on rent control? Journal of economic perspectives, 9(1), 99-120.
• Sims, D. P. (2007). Out of control: What can we learn from the end of Massachusetts rent control? Journal of Urban Economics, 61(1), 129-151.
• Another conversation on video between Sahil Gandhi and Paavo Monkkonen on rent control in India (click the tab “India: Rent Control” on the left).