Rent control, mismatch costs and search efficiency

In the discursive literature on rent control, it has been argued that rent controls cause the rental housing market to become 'tighter'- the vacancy r ate falls, search costs rise, and tenants become less well-matched with hou sing units - but at the same time restrict landlords' ability to exploit th eir market power in setting rents. Such phenomena are excluded by assumptio n in competitive models of the rental housing market. This paper applies a monopolistically competitive model of the rental housing market developed b y Igarashi to explore these effects. In the model, mild rent controls are w elfare-improving but severe controls are harmful. (C) 2000 Elsevier Science B.V. All rights reserved.