Association for Public Policy Analysis & Management

The consensus of the economics literature on tenancy rent control has generally been more favorable than on post-WWII, "hard" rent controls, with some papers even finding that it can be welfare improving in the presence of certain market failures. However, most findings for or against the policy rest upon the assumption that rent control also offers absolute security of tenancy, but no paper in the literature has shown that rent control's tenant protections actually does so. If anything, modern rent control systems in New York, DC, and California incentivize landlords to both evict individual tenants and also to evict all the tenants in the building, demolish it, and then redevelop the property. The first incentive comes from a policy called vacancy decontrol-recontrol, where landlords are free to set the initial rent with a new tenant, and only subsequent rent increases are capped. The second incentive comes from an new building exemption in rent control laws, that's meant to ensure that rent control does not unduly lower the housing supply. Neither policy nor the tenant protections more generally have ever been previously empirically examined in the literature, and this study will be informative to both policymakers and economists on the practical implications of both rent control specifically and the strength of tenant protections more broadly.

This is the first paper in the literature that empirically demonstrates that economic evictions in response to rent increases occur in spite of robust tenant protections. Utilizing an empirical strategy new to the literature of localized price increases driven by corporate commuter shuttle stop placements in San Francisco, neighborhoods with greater shuttle coverage saw increases in evictions in rent-controlled buildings. A robustness check instrumenting for shuttle stop placement confirms the original findings. Whole-building eviction rates are shown to increase, while single-unit evictions decrease, suggesting that the benefits from exiting the controlled market outweigh the greater costs associated with evicting all the tenants. Changes to tenant protection policies can modestly lower the eviction rate, but even relocation payments for evictions are not enough of a disincentive when the housing market is tight, such as the case for modern San Francisco.