Housing Market Spillovers: Evidence from the End of Rent Control in Cambridge Massachusetts

68 Pages Posted: 8 Jun 2012 Last revised: 12 Jul 2023

See all articles by David H. Autor

David H. Autor

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Christopher Palmer

MIT Sloan; National Bureau of Economic Research (NBER)

Parag A. Pathak

Massachusetts Institute of Technology (MIT) - Department of Economics

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Date Written: June 2012

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.

Suggested Citation

Autor, David H. and Palmer, Christopher and Pathak, Parag A., Housing Market Spillovers: Evidence from the End of Rent Control in Cambridge Massachusetts (June 2012). NBER Working Paper No. w18125, Available at SSRN: https://ssrn.com/abstract=2079918

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IZA Institute of Labor Economics

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Christopher Palmer

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Parag A. Pathak

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