According to a newly published study, New York City’s rent control policy likely raised unemployment by discouraging job search. Analyzing data from 2002 to 2017, the study found that rent stabilization — or second-generation rent control — increased a tenant’s likelihood of unemployment by at least 4 percentage points, likely with far-reaching effects on the city’s economy.
This should not come as a surprise. Rent control has been widely studied, and its harmful effects are well-documented.
In a 2021 report, American Experiment compiled research evidence on rent stabilization and reviewed its impact across several regions. The findings showed that where these laws were enacted, the effects were consistently negative. Among other things, rent stabilization,
- reduced housing supply
- discouraged maintenance, lowering housing quality
- depressed property values
- misallocated housing, leading to waste
- Reduced mobility, preventing people from looking for better economic opportunities.
The new study is among the first to examine how rent control affects the labor market, where the impact can take two main forms. On the one hand, lower rental prices reduce mobility, discouraging people from moving to areas with stronger job opportunities. On the other hand, rent control can weaken tenants’ incentives to seek employment more directly.
The study focuses on the second channel, underscoring yet another unintended consequence of rent control that extends beyond housing itself.
