Home » The Global Evidence on Rent Control: A Review of Economic Impacts and Policy Consequences

The Global Evidence on Rent Control: A Review of Economic Impacts and Policy Consequences

August 2025

Introduction

This Backgrounder provides a comprehensive review and synthesis of the global economic evidence on the effects of rent control. While frequently advanced as a policy to enhance housing affordability and protect tenants from rising costs, a vast body of international research demonstrates that rent control is a counterproductive policy tool with significant negative consequences. The evidence consistently shows that these policies ultimately undermine the goal of creating a more affordable and accessible housing market, with consistent and predictable negative outcomes observed in markets where rent controls are implemented.

First, rent control policies lead to a quantifiable reduction in both the quantity and quality of the available rental housing stock. Landlords, faced with capped revenues that may not keep pace with costs, respond by reducing investment in maintenance and repairs, leading to a degradation of existing properties. Furthermore, these policies create powerful incentives for property owners to remove units from the rental market altogether, thereby permanently shrinking the supply of rental homes.

Second, the implementation of rent control constricts supply in a controlled sector but ultimately funnels excess demand into the uncontrolled sector, driving up market rents for those not covered by the regulations. This makes housing less affordable. The evidence also reveals that rent control imposes a hidden cost on the entire community by degrading neighbourhood quality and suppressing the value of surrounding properties, even those never subject to controls.

Third, rigorous studies show that rather than serving as a tool for social equity, rent control can accelerate gentrification by encouraging the replacement of older rental stock with high-end condominiums. Recent evidence from St. Paul, Minnesota, demonstrates that a strict rent control policy resulted in a regressive transfer of wealth from lower-income, often minority, property owners to higher-income, often white, tenants. The policy also creates a housing misallocation, where tenants are “locked in” to units that may no longer suit their needs, reducing labour mobility and economic dynamism.

International evidence shows that a more effective and evidence-based approach to housing affordability involves a dual strategy: implementing supply-side reforms to encourage the construction of new housing at all price points and providing targeted, demand-side financial support, such as rent support programs, to households in genuine need.

Why It Matters: Relevance to Canada’s CRE Sector & REALPAC Members

Global evidence shows that rent control consistently reduces supply, worsens affordability over time, and distorts markets. In Canada, where purpose-built rental construction already faces high taxes and costs, limited margins, slow approvals, and regulatory barriers, adopting or expanding rent control would further discourage investment at a time when large-scale capital deployment is urgently needed to address housing shortages.

For REALPAC Members: Rent control caps revenue without reducing costs, may erode asset values, and discourages both new construction and reinvestment in existing stock. This may lead to deterioration in quality, reduced liquidity, and increased financing risk. REALPAC Members may face lower returns and higher barriers to project viability, making it harder to mobilize capital for much-needed development.
For Policymakers: Rent control may appear to provide short-term relief for incumbent tenants, but the global evidence shows it consistently worsens affordability in the long run. Rather than distorting markets with price ceilings, policymakers can achieve tenant stability and affordability more effectively by addressing root causes: modernizing zoning, streamlining approvals, and offering targeted financial support for lower-income existing tenants, such as rent support programs. This would grow overall supply while ensuring that vulnerable households receive direct, efficient assistance, without undermining investment or long-term housing supply. The best type of rental market for tenants is one with moderate vacancy rates that keep rents low and give tenants the choice to move to follow a job or change a desired location, without a material increase in rent. As an illustration, when five units compete for four tenants, rents fall as landlords compete for renters. When five tenants compete for four units, rents rise as renters compete for scarce housing. Supply therefore is what ultimately matters.

Section 1: The Economic Consensus on Price Controls in Housing Markets

Price controls in housing markets is one of the most studied phenomena in economics, and the findings have enduring consensus among experts. This consensus is not based on ideology but on the predictable and observable reactions of market participants – both landlords and tenants – to the incentives created by artificially constraining prices. While the political appeal of rent control is undeniable, its economic consequences are consistently and overwhelmingly negative.

The Classic Price Ceiling Model

Rent control is a form of government-mandated price ceiling. In any introductory economics course, the price ceiling is used as a classic illustration of a market intervention that, while often well-intentioned, creates predictable distortions and inefficiencies.¹

In a free market, the price of rental housing adjusts until the quantity of housing that landlords are willing to supply equals the quantity that tenants wish to rent. When a government imposes a rent control ordinance that sets a maximum rent below this equilibrium price, the market can no longer clear.

The immediate consequences are twofold. First, at the lower, controlled price, the quantity of housing demanded by tenants increases. More people will want to rent apartments than they would at the higher market rate. Second, and simultaneously, the quantity of housing that landlords are willing to supply decreases. The lower price makes providing rental housing less profitable, reducing the incentive for landlords to offer units for rent. The result is an inevitable and persistent shortage, where the quantity of housing demanded exceeds the quantity supplied.² This shortage is not a temporary anomaly; it is a structural feature of a market with a binding price ceiling. All subsequent negative effects of rent control, from deteriorating quality to a shrinking rental stock, stem directly from this foundational concept of a policy-induced shortage.³

The Strength of the Consensus

The conclusion that rent control is a counterproductive policy is not a fringe opinion but represents one of the strongest points of consensus within the economics profession. A landmark poll conducted in 1992 by the American Economic Association found that 93% of its members agreed with the statement that “a ceiling on rents reduces the quality and quantity of housing”.³ This level of agreement is exceptionally rare in the social sciences and places rent control in the same category of settled issues as the benefits of free trade.

This view has been echoed consistently by leading economists^{3, 4} amongst whom there is broad and enduring agreement about the impact of rent control.⁵

The Persistence Paradox: Politics vs. Economics

Given the overwhelming economic evidence and consensus, a critical question arises: why does rent control remain popular from a policy perspective?⁵ The answer lies in the field of public choice theory, which studies how political processes and self-interest affect policy outcomes.

The persistence of rent control is a classic example of a policy with concentrated benefits and diffused costs. The benefits of rent control are immediate, tangible, and highly concentrated on a specific, identifiable group: current tenants living in rent-controlled units. These tenants receive a direct and visible financial benefit in the form of lower-than-market rent, providing them with a powerful incentive to organize politically and advocate for the continuation and expansion of these policies.⁷

In stark contrast, the costs of rent control are diffuse, delayed, and borne by a much larger, less-defined, and less-organized group. These costs include:

Reduced Housing Quality: As landlords cut back on maintenance, the quality of the housing stock slowly deteriorates over many years.⁷
Fewer New Units: The chilling effect on new construction means that future housing shortages are worse than they otherwise would be, a cost borne by future residents.⁹
Higher Rents for “Outsiders”: Newcomers to the city or those living in the uncontrolled sector face higher rents due to the spillover effects of the policy.¹⁰
Community-Wide Costs: The entire community bears the cost of a less dynamic housing market, reduced labor mobility, and a potentially diminished property tax base.¹¹

This creates a fundamental political asymmetry: politicians win strong support from motivated and grateful tenants, while the costs are diffused, long-term, and borne by future tenants, landlords, and the broader community. Furthermore, because these costs often manifest over the long term, they are less likely to be directly attributed to the rent control policy itself – making the policy remain viable. The issue is not a lack of economic evidence, but about an incentive structure that rewards short-term, visible benefits, despite long-term, hidden costs.

Section 2: A Global Review of Evidence: The Kholodilin Meta-Analyses

While the theoretical case against rent control is straightforward, the strongest evidence comes from the global meta-analyses of Dr. Konstantin Kholodilin (DIW Berlin). His reviews synthesize nearly 200 empirical studies spanning 60 years and almost 100 countries, offering what scholars describe as as close to a consensus as economic research can realistically get.³

Across this dataset, the results are consistent:

Rent control reduces the supply of rental housing, both by discouraging new construction (11 of 16 studies found negative impacts) and by incentivizing landlords to remove existing units from the market.
It also degrades housing quality, as 15 of 20 studies report deferred maintenance and deterioration, with not a single study finding a positive effect.
Tenant mobility falls sharply; 25 of 26 studies document “lock-in” effects that misallocate housing, leaving large apartments underused and families crowded in smaller ones.
Spillovers are equally clear: 14 of 17 studies found higher rents in the uncontrolled sector as demand shifts away from regulated units.

These findings, replicated across diverse legal and cultural contexts, confirm that the harms of rent control are structural, not local anomalies. A recent example comes from Buenos Aires: after rent control was repealed, rental listings surged by 195%, confirming the meta-analysis finding that once revenue caps are lifted, supply responds rapidly. This reinforces that the negative effects of rent control are structural, not cultural or local, and offers a cautionary lesson for Canadian policymakers.

Section 3: Case Studies – Real-World Evidence of Rent Control’s Effects

While meta-analyses establish the global pattern, case studies show how these mechanisms unfold in practice. San Francisco, Cambridge, and St. Paul illustrate that despite differences in design and timing, rent control consistently undermines affordability for the broader community. Each example reveals the same logic: narrow benefits for incumbent tenants come at the cost of reduced supply, distorted investment, and widespread harm.

San Francisco, California (Diamond et al., 2019): Expansion of rent control stabilized some tenants but reduced rental supply by 15%, fueled gentrification, and raised citywide rents by 5%.
Cambridge, Massachusetts (Autor et al., 2014): Repeal of rent control increased property values by $2B, with 85% of gains from spillovers, proving the policy had imposed large hidden costs on entire neighborhoods.
St. Paul, Minnesota (Aydin et al., 2022): A strict 3% cap without vacancy decontrol caused a $1.6B loss in property values and shifted wealth regressively from lower-income, minority landlords to wealthier tenants.

Together, these case studies confirm that rent control, whether imposed, expanded, or repealed, produces predictable outcomes: stability for a few, but higher rents, reduced supply, and lasting harm for the broader community.

Section 4: Addressing the Counterarguments: Stability, Fairness, and “Smart” Policy

To engage in a productive policy discussion, it is essential to address common arguments in favour of rent control. Advocates often argue that modern rent control policies are more nuanced than earlier systems, that tenant stability outweighs potential costs, and that economic consensus is shifting. The evidence however shows otherwise.

Argument 1: “Critiques are based on outdated ‘first-generation’ controls.”

Advocates argue that the economic case against rent control is based on analyses of archaic “first-generation” or “hard” rent freezes, and that modern “second-generation” or “soft” rent stabilization policies, which may allow for annual increases tied to inflation, exemptions for new construction, and vacancy decontrol -, are fundamentally different and do not have the same negative effects.²³Yet, the evidence systematically refutes this claim. In San Francisco, study analyzed a policy with vacancy decontrol, yet it still found a 15% reduction in the rental supply and a 5.1% increase in city-wide rents.¹⁴ Moreover, in Cambridge, a study analyzed a system that, while stringent, was a product of the 1970s, not the 1940s. Its removal still revealed $2 billion in suppressed value and negative externalities.¹⁰The fundamental economic logic is inescapable: by constraining revenue, any form of binding rent control reduces the incentive to supply and maintain rental housing.

Argument 2: “Rent control provides crucial tenant stability.”

The strongest arguments in favour of rent control are that it provides stability and security for tenants, protecting them from displacement in rapidly appreciating markets.²³ The research confirms that this effect is real. The San Francisco study, for instance, found that rent control made incumbent tenants nearly 20% more likely to stay in their homes.⁸

This benefit, the protection of long-term tenants, is both socially and emotionally significant. For many, rent control offers peace of mind and continuity in their communities.

However, this stability often comes at a cost that is disproportionately borne by those not covered by the policy. The evidence suggests that rent control, while beneficial for current tenants, creates broader inefficiencies and inequities in the housing market. These include:

A smaller, more expensive market for all: As seen in San Francisco, rent-controlled units are often withdrawn from the rental pool over time, reducing supply and increasing average rents city-wide.⁸
Reduced mobility and opportunity: Tenants may be discouraged from moving for better jobs or more suitable housing, a phenomenon sometimes called the “lock-in” effect, which can undermine labour market fluidity and personal well-being.⁵
Misallocation of housing: With no incentive to right-size their homes, some tenants remain in units that no longer match their needs, while others, often families or newcomers, face overcrowding.⁷

The central policy question is not whether rent control works in providing stability; the evidence confirms that it does, but whether it is the most equitable and efficient way to achieve that goal. In practice, rent control creates a form of housing lottery, where a few fortunate tenants benefit significantly, while many others face reduced access, higher prices, and limited choices.

A more inclusive approach might involve direct financial assistance to vulnerable renters, expanded affordable housing programs, or targeted protections that support mobility and supply.⁸ These strategies can uphold the core value of tenant stability without distorting the broader housing market or reducing opportunities for future generations.

Argument 3: “The economic consensus is shifting.”

In recent years, advocacy groups and some academics have claimed that the long-standing economic consensus against rent control is eroding or evolving, much like the consensus on the minimum wage.⁶ They often point to letters signed by economists or studies from university-affiliated policy centers to support this claim.⁶ However, it is crucial to distinguish between different types of evidence: advocacy letters and reports from policy institutes, while part of the public discourse, do not carry the same weight as peer-reviewed research published in top-tier academic journals.

The core findings from high-quality, peer-reviewed, empirical research have strongly reaffirmed the traditional consensus. The most rigorous recent studies, the Kholodilin meta-analyses and the NBER working papers on San Francisco, Cambridge, and St. Paul, all point decisively to the negative consequences of rent control.⁷ These studies use sophisticated empirical methods and robust data to isolate the causal effects of the policy, and their conclusions are aligned with the established economic theory.

Section 5: The Path Forward: Evidence-Based Policies for Housing Affordability

A critique of rent control is incomplete without a discussion of viable alternatives. To be a constructive partner in solving the housing affordability crisis, the real estate industry must actively champion policies that work. Economic research points toward a clear, two-pronged strategy: increasing the supply of housing and providing direct, targeted financial support to households in need.

The Core Problem: A Supply and Income Mismatch

Housing affordability shows a dual mismatch: demand exceeds supply, causing low vacancies and rising prices.⁴ Meanwhile, many incomes haven’t kept up with living costs, making even moderately priced housing unaffordable. This reflects both supply and demand issues.²³

An effective policy response must address both sides of this equation. Rent control fails because it simply mandates lower prices, which exacerbates the supply shortage and creates numerous negative side effects. A more rational approach is to address the underlying problem of housing scarcity, rather than just the symptom of high rents.

Solution 1: Increase Housing Supply

The most effective and durable long-term solution to high housing costs is to increase the supply of housing,⁴ with several key reforms including:

Zoning Reform: to allow for greater density, sometimes called “inclusive zoning” or “upzoning”, and increase supply in desirable, high-opportunity neighbourhoods.⁹
Streamlined Permitting and Reduced Regulation: to reduce barriers, delays and costs of construction, which are ultimately passed on to residents, while maintaining essential health and safety standards.⁴

By removing government-imposed barriers to construction, municipalities can enable the market to respond to housing demand, creating more homes and more choices for residents at all income levels.

Solution 2: Provide Targeted Support

While increasing supply is the key long-term solution, many low-income households cannot afford market-rate housing today. For these households, direct financial support is a far more efficient and equitable solution than market-distorting price controls.

Rental Assistance Subsidies: Government-funded direct rental subsidies provide low-income households with the financial means to afford housing in the private market.²⁸ Unlike rent control, this approach provides assistance directly to those who are income-verified and in genuine need, ⁵ empowers tenants with choice to find housing that best suits their needs, and does so without distorting market signals. Landlords still receive market-rate rent, preserving their incentive to maintain their properties and supply rental housing.⁸

Contrasting the Approaches

The choice for policymakers is stark. Rent control represents a path of market distortion, attempting to create affordability for a few by shrinking the overall housing pie, leading to a cascade of negative consequences that harm the broader community and future generations. In contrast, the dual approach of boosting supply and providing targeted subsidies is a path of market enhancement. It seeks to grow the housing pie for everyone while delivering assistance efficiently and equitably to those who need it most.

Conclusion

The international evidence on rent control is consistent, clear, and compelling. From large-scale meta-analyses reviewing nearly 200 individual studies to rigorous, quasi-experimental research published in the world’s top academic journals, the conclusion is that rent control is a policy that consistently fails to achieve its objectives and generates severe, negative, and often perverse consequences.

This Backgrounder has synthesized this vast body of evidence, showing that rent control policies, regardless of their specific design, reliably lead to:

A reduction in the supply of rental housing, as landlords convert properties to other uses and developers are discouraged from building new rental stock.
A degradation in the quality of the existing housing stock, as revenue caps remove the incentive for investment in maintenance and improvements.
Higher rents in the uncontrolled sector, making housing less affordable for newcomers and those not covered by the policy.
A misallocation of housing and reduced labor mobility, as the “lock-in” effect prevents tenants from moving in response to changing life or employment needs.
Negative externalities that harm the entire community, suppressing neighborhood property values and eroding the local tax base.
Perverse social outcomes, including the acceleration of gentrification and regressive wealth transfers that harm the very low-income and minority groups the policy is ostensibly designed to help.

For Canadian policymakers grappling with a genuine housing affordability crisis, the global experience offers a crucial lesson: the path to a more affordable and equitable housing future does not lie in distorting the market with price controls. Rather, it lies in evidence-based solutions that address the root causes of the problem. This means implementing bold supply-side reforms to remove barriers to new construction and allowing the housing stock to grow to meet demand. It also means providing direct, targeted, and efficient financial support to low-income households, ensuring they can access safe and affordable housing without undermining the market for all. By rejecting the failed approach of rent control and embracing a strategy of growth and targeted support, Canada can build a healthier housing market that serves the needs of all its residents, both present and future.

Contact: Michael Brooks, CEO, REALPAC, mbrooks@realpac.ca, 416.642.2700 x225

References

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