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Who Benefits from Rent Control? Socio-Economic Determinants of the Rent Subsidy

TitleWho Benefits from Rent Control? Socio-Economic Determinants of the Rent Subsidy
Publication TypeWorking Paper
Year of Publication2021
AuthorsDonner, H, Kopsch, F
Abstract

A common aim of rent control is to assist low-income households and decrease segregation. We test
the income-distributional effects of rent control with a novel dataset that includes characteristics of
those who received rental apartments between 2011 and 2016 in central Stockholm, Sweden. In this
setting, rental apartments are allocated through a centrally managed que.

To estimate the rent subsidy, we estimate hypothetical market rents by taking the owner-occupied
market as a point of deviation. We find that the average rental apartment has a rent that is considerably
below market clearing levels, with an average monthly rent subsidy of 4,338 SEK ($502).

From an income-distributional perspective, we find several regressive effects. Individuals who receive
rent-controlled apartments have incomes that are on average 30% higher than the metropolitan area
average. Within this group, we find that rental apartments in the highest quantile of the subsidy have
older tenants with substantially higher incomes compared to tenants who receive less subsidized
apartments. The regressive effect is driven by high earners affording higher rents (renting larger
apartments) and being able to wait longer in que. The most subsidized apartments have tenants that
are on average 13 years older than the least subsidized ones.

Controlling for time in que, we find that renters in the highest quantile of annual income (who on
average make 836,008 SEK/$96,648) receive monthly rent subsidies that are 1,034 SEK ($120) higher
than renters in the lowest quantile of income (who on average make (250,802 SEK/$28,994).

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