Context

• December 1970 through 1994, all rental units in Cambridge built prior to 1969 were regulated by a far-reaching rent control ordinance that placed strict caps on rent increases and tightly restricted the removal of units from the rental stock.
• Just 2 months later in January 1995, a majority of properties were decontrolled. A last-minute legislative compromise, however, allowed disabled, elderly, and low-income renters to retain their current units at their controlled rents for up to 2 years. Though only a small share of residents received rent control extensions, this compromise likely created some uncertainty about whether decontrol was final, at least until the grandfathering period expired in 1997 with no further controls in place.
• Cambridge’s rent control policy did not allow for so-called vacancy decontrol, whereby controlled rental units were re- turned to market rate rents after protected tenants moved out
• On average, 26.9 percent of Cambridge residents changed locations annually

Channels

• the direct effect on decontrolled properties of the elimination of price controls and condominium conversion restrictions and associated investments
• the total value of Cambridge residential investments in these 10 years was less than one-quarter as large as the estimated increment to Cambridge residential housing values induced by rent control removal, suggesting that the allocative rather than the investment channel is the more important explanation for the post-1994 rise in the market value of never-controlled properties.

Questions

• The line between direct and indirect returns is a little unclear. For example, the authors’ write that “the flow of returns from associated capital investments” should be considered direct returns.

• The following bolded part is surprising:

  <aside>

  A central finding is that post-decontrol price appreciation was significantly greater at units that had a larger fraction of formerly controlled neighbors: residential properties at the 75th percentile of rent control exposure gained approximately 13 percent more in assessed value following decontrol than did properties at the 25th percentile of exposure. This differential appreciation of properties in rent control–intensive locations was equally pronounced among decontrolled and never-controlled units, suggesting that rent control removal spurred overall gains in neighborhood desirability.

  </aside>

• What are we to make of the rental turnover time series — particularly the drop prior to the law change?

• Why would rent control apply to condominiums??

• What does the RCI capture in table #2?