The Effect of Second Generation Rent Controls: New Evidence from Catalonia

Abstract

Catalonia enacted a second-generation rental cap policy in late September 2020. The policy affected some municipalities but not others and, within the former, the policy only affected the units with prices above a certain reference price. Using microdata on rental units, we analyze the effect of the policy on both rental prices and the composition of rental supply. We find that the policy led to a reduction in rental prices of approximately 5 percent. The policy also led to a decline in the overall supply of rental units and to a significant shift in the composition of units available in the market. Using variation from the policy change, we compute a rental housing supply elasticity of approximately 3.