Premium
Measuring the Efficiency Cost of Rent Control
Author(s) -
Vitaliano Donald F.
Publication year - 1986
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/1540-6229.00369
Subject(s) - economics , renting , deadweight loss , microeconomics , elasticity of substitution , control (management) , payment , econometrics , production (economics) , welfare , finance , market economy , management , political science , law
This paper estimates the burden of lost producer surplus imposed on landlords by rent control. The approach employed measures the reduction in Marshallian quasi‐rent from the side of the derived demand for factors rather than the short‐run supply of housing. A constant elasticity of substitution production function is employed to derive the input demand equation. The equation is estimated using post‐war rent control data from five major New York State cities. It turns out that rent control reduced quasi‐rent about 15%. The deadweight loss is estimated at 1.5% of gross rental payments or about 5% of net income before debt charges.