Housing Market Spillovers: Evidence from the End of Rent Control in Cambridge Massachusetts
Name
Autor12-14.pdf
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2.08 MB
Format
Adobe PDF
Checksum (MD5)
baa32a1d52b5d0d5c66535abdaa086f8
Author(s)
Autor, David
Palmer, Christopher J.
Pathak, Parag A.
Date Issued
May 24, 2012
Publisher
Cambridge, MA: Department of Economics, Massachusetts Institute of Technology
Series/Report no.
Working paper, Massachusetts Institute of Technology, Dept. of Economics;12-14
Abstract
Understanding potential spillovers from the attributes and actions of neighborhood residents onto the value of surrounding properties and neighborhoods is central to both the theory of urban economics and the development of efficient housing policy. This paper measures the capitalization of housing market spillovers by studying the sudden and largely unanticipated 1995 elimination of stringent rent controls in Cambridge, Massachusetts that had previously muted landlords’ investment incentives and altered the assignment of residents to locations. Pooling administrative data on the assessed values of each residential property and the prices and characteristics of all residential transactions between 1988 and 2005, we find that rent control’s removal produced large, positive, and robust spillovers onto the price of never-controlled housing from nearby decontrolled units. Elimination of rent control added about $1.8 billion to the value of Cambridge’s housing stock between 1994 and 2004, equal to nearly a quarter of total Cambridge residential price appreciation in this period. Positive spillovers to never-controlled properties account for more half of the induced price appreciation. Residential investments can explain only a small fraction of the total.
Subjects
Urban Economics
Residential Externalities
Rent Control
Price Regulations
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