1 Diamond et al. (2019): Rent Control in San Francisco

Reference. Diamond, R., McQuade, T., and Qian, F. (2019). The effects of rent control expansion on tenants, landlords, and inequality: Evidence from San Francisco. American Economic Review, 109(9):3365-3394.  

Research question. Does rent control protect incumbent tenants, and at what cost to housing supply and affordability for others?   

Identification strategy. In 1994, San Francisco extended rent control to small multi-family residential buildings built before 1980. Buildings with 2-4 units in structures built before 1980 became newly covered; the comparison group consists of single-family homes and small buildings built after 1980 (which remained exempt). The identification uses a regression discontinuity at the 1980 construction-year cutoff, comparing newly covered to never-covered small buildings before and after 1994.  

Key results. Rent control substantially reduced renter mobility: tenants in newly covered buildings were 19 percentage points less likely to move within five years relative to tenants in uncovered buildings. This represents a large welfare gain for incumbents. However, landlords responded by reducing the supply of rent-controlled housing: they were more likely to convert units to condominiums or owner-occupied housing (a 15% reduction in rental supply) or to leave units vacant. Rents in the uncovered market rose by approximately 7% citywide due to the supply reduction, worsening affordability for non-incumbents. The policy thus created large distributional effects: it protected existing tenants at the expense of prospective renters who could not find affordable housing.  

Takeaway. Rent control protects incumbents but restricts rental supply and raises market rents for non-covered units; its short-run benefits may be offset by long-run affordability costs for future renters.  

2 Autor et al. (2014): Rent Decontrol and Property Value Spillovers

Reference. Autor, D. H., Palmer, C. J., and Pathak, P. A. (2014). Housing market spillovers: Evidence from the end of rent control in Cambridge, Massachusetts. Journal of Political Economy, 122(3):517-558.  

Research question. When rent-controlled units are decontrolled, what are the spillover effects on surrounding property values and housing quality?   

Identification strategy. Cambridge, Massachusetts abolished rent control in 1995 following a statewide ballot referendum. This creates a sharp, policy-driven change in the rent control status of approximately one-third of the Cambridge rental stock. The paper uses a difference-in-differences design comparing properties near formerly rent-controlled buildings to properties elsewhere in Cambridge, before and after 1995. Because the location of rent-controlled units was determined by pre-1995 housing regulations, the proximity to decontrolled units is plausibly exogenous to post-1995 property value trends.  

Key results. Decontrolled properties experienced dramatic appreciation: property values of formerly rent-controlled units rose by approximately 45% in the years following decontrol. Neighbouring non-controlled properties within 0.1 miles of decontrolled buildings experienced a 12% increase in property values relative to comparable properties farther away. The authors estimate a total wealth gain to Cambridge property owners of approximately $2 billion, representing the capitalised value of restored property rights and neighbourhood quality improvements triggered by decontrol.  

Takeaway. Rent control depresses property values and neighbourhood quality, with substantial negative spillovers to nearby properties. Decontrol generates large aggregate gains—but these accrue to property owners, not renters, raising distributional questions.  

3 Glaeser et al. (2005): The Cost of Land Use Regulation in Manhattan

Reference. Glaeser, E. L., Gyourko, J., and Saks, R. E. (2005). Why is Manhattan so expensive? Regulation and the rise in housing prices. Journal of Law and Economics, 48(2):331-369.  

Research question. How much of Manhattan's high and rising housing prices is explained by land use regulation rather than land scarcity?   

Identification strategy. The paper compares the physical cost of construction (materials and labour, from construction cost indices) to the market transaction price of new apartment units. In a competitive market, prices should equal marginal construction costs. The wedge between price and cost identifies the implicit zoning tax: the mark-up attributable to regulatory restrictions on supply.  

Key results. In Manhattan, the physical cost of constructing a new apartment unit (materials, labour, and reasonable developer profit) is approximately $230 per square foot. The market price for new units is approximately $600-800 per square foot. The gap—the zoning tax of roughly $370-570 per square foot—represents the implicit cost of regulatory supply restrictions. The authors show that this tax has risen dramatically since 1970. In most US cities, the zoning tax is near zero (prices equal construction costs); in New York, San Francisco, and a few other markets, it is enormous. The rise in Manhattan prices since 1970 is almost entirely explained by this rising zoning tax rather than by increasing land scarcity or construction cost growth.  

Takeaway. High urban housing prices in major US cities are primarily regulatory phenomena. Zoning reforms that allow denser development would substantially reduce prices; land scarcity is not the binding constraint.  

4 Autor et al. (2013): Low-Wage Labour Markets and Housing Costs

Reference. Autor, D. H., Dorn, D., and Hanson, G. H. (2013). The China syndrome: Local labor market effects of import competition in the United States. American Economic Review, 103(6):2121-2168.  

Note. This paper (Autor et al. 2013, AER) on the China shock is summarised here because a key mechanism it identifies operates through local housing markets. Commuting zones exposed to Chinese import competition experience large employment declines in manufacturing; a secondary consequence is reduced housing demand and falling home values in affected areas.  

Research question. Do local labour market shocks from import competition reduce housing prices in affected areas?   

Identification strategy. The authors instrument local exposure to Chinese import competition using Chinese import growth in other high-income countries (the Bartik shift-share instrument). This removes the component of US-specific demand shocks while preserving plausibly exogenous variation in Chinese manufacturing competitiveness.  

Key results on housing. Commuting zones with higher Chinese import exposure experience significant declines in housing values. A one-standard-deviation increase in import exposure (≈$1,800 per worker) reduces median home values by approximately 2-4%, partly offsetting the wage and employment losses for workers who own homes but also reducing household wealth. The housing price decline is concentrated in manufacturing-intensive neighbourhoods. This interaction between labour and housing markets illustrates how trade shocks transmit into local economic conditions through multiple channels.  

Takeaway. Labour market shocks affect housing markets, not just wages; place-based economic distress from manufacturing decline is amplified through falling housing values for incumbent homeowners and complicated by compositional changes as residents move.  

References   

1. Autor, D. H., Dorn, D., and Hanson, G. H. (2013). The China syndrome: Local labor market effects of import competition in the United States. American Economic Review, 103(6):2121-2168.  
2. Autor, D. H., Palmer, C. J., and Pathak, P. A. (2014). Housing market spillovers: Evidence from the end of rent control in Cambridge, Massachusetts. Journal of Political Economy, 122(3):517-558.  
3. Diamond, R., McQuade, T., and Qian, F. (2019). The effects of rent control expansion on tenants, landlords, and inequality: Evidence from San Francisco. American Economic Review, 109(9):3365-3394.  
4. Glaeser, E. L., Gyourko, J., and Saks, R. E. (2005). Why is Manhattan so expensive? Regulation and the rise in housing prices. Journal of Law and Economics, 48(2):331-369.