Rent price control – yet another great equalizer of economic inequalities? Evidence from a century of historical data

Abstract

The long-run U-shaped patterns of economic inequality are standardly explained by basic economic trends (Piketty’s r > g), taxation policies or ‘great levellers’ such as catastrophes. This article argues that housing policy, and particularly rent control, is a neglected explanatory factor in understanding macro inequality. We hypothesize that rent control could decrease overall housing wealth, lower incomes of generally richer landlords and increase disposable incomes of generally poorer tenants. Using original long-run data for up to 16 countries (1900–2016), we show that rent controls lowered wealth-to-income ratios, top income shares, Gini coefficients, rents and rental expenditure. Overall, rent controls need to be strict in order to have tangible effects, and only the stricter historical rent controls did significantly reduce inequalities. The study argues that housing policies should generally receive more attention in understanding economic inequalities.