The Institute of Economic Affairs, a free-market think tank, has conducted a comprehensive study of rent control policies around the world and concluded that they cause far more negative problems than actual benefits.

According to the study, 56 out of 65 examples of rent controls actually led to a reduction in rents as intended. However, almost all of these measures had unintended side effects, such as preventing the construction of new housing, deteriorating the quality of the housing stock, restricting tenant mobility and strategic misallocation of housing.

The IEA study was led by Dr. Konstantin A. Kholodilin, a senior researcher at the German Institute for Economic Research in Berlin. He reviewed 196 studies conducted over a 60-year period, covering nearly 100 countries on all continents.

The IEA says: “The briefing paper underlines the strong and sustained consensus in the academic literature on the impacts of rent control. According to Kholodilin, rent control benefits existing tenants but comes at a significant cost to society as a whole.

“This leads to lower maintenance costs, conversion to condominiums and less construction of new properties, which ultimately exacerbates the housing shortage.”

According to Kholodilin, rent controls can also lead to “overdemand” for housing, which can make it difficult for new residents to find housing. This in turn reduces labor mobility, increases discrimination against marginalized groups, and encourages the black market.

The regulation can also lead to people staying in their existing homes longer than intended. For example, a widower may stay in a large rent-controlled apartment even though his family has long since moved out. The lack of movement leads to a “misallocation” of available real estate, causing further economic damage.

Kholidilin says: “Rent control effectively reduces rents in the controlled sector, but it comes at a high price. Tenants who live in rent-controlled housing benefit the most, at least in the short term, while newcomers lose out from rent control. In the long term, rent control can harm the rental sector by forcing landlords to convert their housing and turning tenants into homeowners.”

And Dr Kristian Niemietz, IEA’s editorial director, says: “Economists are a notoriously divided profession: ask three economists and you’ll get four opinions. But there are exceptions, and the study of rent controls is one of them. This is an area where the empirical evidence really overwhelmingly points in the same direction. The finding that rent controls reduce the supply and quality of rental housing, reduce housing construction, reduce the mobility of private renters and lead to a misallocation of the existing rental housing stock is as close to a consensus as economic research can realistically get.”

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