Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/251463 
Year of Publication: 
2022
Series/Report no.: 
DIW Discussion Papers No. 1999
Publisher: 
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
Abstract: 
In 2020, Berlin introduced a rigorous rent-control policy responding to soaring rents by setting a cap on rental prices: the Mietendeckel (rent freeze). The policy was revoked one year later by the German Constitutional Court. Although successful in reducing rents during its duration, the consequences for Berlin's rental market and adjacent municipalities are not clear. In this paper we evaluate the short-term causal effect of the rent freeze on the supply-side of the market, both in terms of prices and quantities. We develop a theoretical framework capturing the key features of the rent freeze, and test its predictions using a rich pool of detailed rent adverts. In addition, we estimate hedonic-style Difference-in-Differences and Spatial Regression Discontinuity models comparing price trajectories of dwellings inside and outside the policy's scope. Advertised rents drop significantly upon the policy's enactment. A substantial rent gap across the administrative border emerges, with rapidly growing rents for Berlin's (unregulated) adjacent municipalities. Moreover, we document a significant drop in the number of advertised properties for rent, a share of which appears to be permanently lost for the rental sector.
Subjects: 
First-Generation Rent Control
Rent Freeze
Urban Policy
Local Political Economy
Supply Disruptions
Legal Uncertainty
Berlin
JEL: 
C14
C43
O18
D04
Document Type: 
Working Paper

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