Forward to the past: Short-Term Effects of the Rent Freeze in Berlin

Anja M. Hahn
Vienna University of Economics and Business

Konstantin A. Kholodilin
DIW Berlin & NRU HSE, St. Petersburg

Sofie R. Waltl
Luxembourg Institute of Socio-Economic Research & Vienna University of Economics and Business

Abstract

In 2020, Berlin enacted a rigorous rent-control policy: the “Mietendeckel” (rent freeze), aiming to stop rapidly growing rental prices. We evaluate this newly enacted but old-fashionably designed policy by analyzing its immediate supply-side effects. Using a rich pool of rent advertisements reporting asking rents and comprehensive dwelling characteristics, we perform hedonic-style Difference-in-Difference analyses comparing trajectories of dwellings inside and outside the policy’s scope. We find no immediate effect upon announcement of the policy. Yet advertised rents drop significantly upon the policy’s enactment. Additionally, we document a substitution effect affecting the rental market of Berlin’s (unregulated) satellite city Potsdam and adjacent smaller municipalities. On top, the supplemental quantity analyses reveal a stark reduction of the number of advertised rental units hampering a successful housing search for newcomers, (young) first-time renters and tenants aiming for a different housing opportunity.

JEL Codes: C14; C43; O18
Keywords: First-generation rent control, rent freeze, urban policy, rent price, supply disruptions, Berlin

Dissemination

Working Paper: Hahn, Anja M., Kholodilin, Konstantin A. and Waltl, Sofie R., Forward to the Past: Short-Term Effects of the Rent Freeze in Berlin (January 2021). DIW Berlin Discussion Paper No. 1928.

Policy Brief: Hahn, Anja M., Kholodilin, Konstantin A., and Waltl, Sofie R. (2021). Die unmittelbaren Auswirkungen des Berliner Mietendeckels: Wohnungen günstiger, aber schwieriger zu finden. DIW Wochenbericht, 8/2021(2):117–124.

Presentations (incl. scheduled): [LISER, Luxembourg, January 2021] [3rd International Workshop “Market Studies and Spatial Economics”, Moscow, April 2021] [WU Brownbag Lunch Seminar, Vienna, April 2021][idealista España, Spain, May 2021][2021 European Real Estate Society’s Annual Conference, Kaiserslautern, Germany, June 2021] [20th International Conference in Public Economics, Journees Louis-Andre Gerard-Varet, Marseille, France, June 2021] [2021 Annual Meeting of the Austrian Economic Association (NOeG), Innsbruck, June 2021] [Social Policy Association Annual Conference, Swansea, UK, July 2021][European Network for Social Policy Analysis (Espanet) Conference, Leuven, Belgium, September 2021]

In the press (selected):