Landlords, tenants and the public sector in a spatial equilibrium model of rent control

A spatial model is used to explore the effects of urban rent control. When landlords and tenants can alter economic and location decisions, policy effects in controlled and uncontrolled zones may differ from standard predictions. Tenants in both zones may benefit from the control, even after unfavorable landlord adjustments, but these gains are likely to come at the expense of landlords and the public sector. Efforts to restore profits and fiscal balance, without negating utility gains to renters, may fail unless control distortions can be adequately shifted to absentee landowners through lower site rents. Lump-sum renter subsidies may offer equivalent utility gains with less severe impacts on landlords and the public sector, but the supply elasticity of land again matters.