Why Do People Demand Rent Control?

Abstract

We conduct a representative survey experiment in Germany to understand why people support inefficient policies. In particular, we measure beliefs about and preferences for rent control - a policy that is widely regarded as harmful by experts. To tease out causal mechanisms, we provide randomly selected sub-sets of participants with empirical estimates about the effects of rent control on rent prices and housing supply and with information about the consensus among economists against rent control. We find that people update their beliefs and that this leads to lower demand for rent control. Left-wingers update their beliefs more strongly, which reduces the ideological gap in support for rent control by about one quarter. Providing information about economists' rejection of this policy leads to the largest reduction in support. However, the main drivers of support for rent control are fairness considerations and profit motives. Our study also highlights the importance of trust since treatment effects are consistently larger among those who indicate trust in the scientific information provided to them.

Keywords: beliefs about rent control, demand for bad policies, survey experiment, trust in experts.

JEL Classification: H10, H30, H31