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 those, only the units above a certain reference price. Using micro-data on rental units, we analyze the effect of the policy on both rental prices and rental supply. We find that the policy led to a reduction in rental prices of around 5 percent. Half of this price decline is due to changes in the composition of units available in the market, particularly in larger municipalities. The policy also led to a decline in the amount of rental units available in the market. Using variation from the policy change, we compute a rental housing supply elasticity of around 4.