Abstract
The notion that a rigid price-ceiling discourages investment in rental housing has led to the introduction of more flexible rent controls over the past few decades. What distinguishes this ‘second generation’ of rent regulations is that the upward adjustment of rents is allowed to account for inflation and other costs of holding residential real estate. Another characteristic that is common among these dynamically oriented rent controls is that the initial contract rent is not subject to regulation. It is only the growth of rents that is regulated. Yet, in much of economic theory, the static rent ceiling is still used as a benchmark case. Arnott (1995) has called for additional conceptual work to fill this void. It is the purpose of this chapter to make a small contribution to the understanding of how the construction of urban housing may be affected by a flexible rent ceiling.
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McFarlane, A. (2003). Rent Growth Control and the Transition of Land to Urban Use. In: Thalmann, P., Zarin-Nejadan, M. (eds) Construction and Real Estate Dynamics. Applied Econometrics Association Series. Palgrave Macmillan, London. https://doi.org/10.1057/9780230001190_6
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DOI: https://doi.org/10.1057/9780230001190_6
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