Effectiveness of Rent Controls: Evidence from Spain

Growing concerns about housing affordability have prompted the adoption of rent control policies and renewed debates over their effectiveness. This paper provides the first empirical evaluation of the 2024 rent control policy implemented in Catalonia under Spain’s new national housing law. To identify the causal effect of the policy on the rental market, I use municipality-level administrative data and implement several difference-in-differences strategies and event study designs. The results point to a reduction in tenancy agreements and a less robust decrease in rental price growth. While the findings highlight important short-term consequences of rent control, they also underscore the need for caution due to data limitations and limited robustness in some estimates.

💡 Research Summary

This paper provides the first empirical assessment of the 2024 rent‑control policy introduced in Catalonia under Spain’s new national housing law. The regulation designates “stressed residential market areas” and caps the rent of new contracts at the lower of either the previous rent for the same unit or a reference price index. The author evaluates the policy’s impact on two key outcomes: the growth rate of average rental prices and the number of new tenancy agreements per 10,000 inhabitants, the latter serving as a proxy for rental housing supply.

Data come from publicly released administrative records of the Generalitat de Catalunya, covering quarterly average rent and tenancy counts at the municipality level from 2005 to 2024. Because many municipalities were already subject to an earlier regional rent‑control experiment (2020‑2022), the analysis focuses on the post‑March‑2024 period and excludes the second wave of designations (October 2024) due to insufficient post‑treatment observations. A major data limitation is that only the average rent per municipality is available, without adjustment for dwelling size, raising concerns about composition effects. Moreover, rental‑price observations are missing for a large share of control municipalities (only 173 of 680 have data, with additional gaps within those), creating a non‑random missingness problem.

The identification strategy relies primarily on a difference‑in‑differences (DiD) framework. The baseline specification regresses the outcome on municipality and time fixed effects, a treatment‑post interaction, and a set of controls (population size, net migration of natives and foreigners, rent‑to‑income ratio, and pre‑treatment levels of the dependent variable). Standard errors are clustered at the municipality level. To address concerns about parallel‑trend violations, the author supplements the baseline with event‑study estimates, propensity‑score matching, and synthetic‑control methods. The event‑study plots reveal divergent pre‑treatment trends between treated and control groups, casting doubt on the validity of the simple DiD estimator.

Results show a statistically significant decline in the number of new tenancy agreements in treated municipalities after the policy’s introduction. This supply‑side effect is robust across alternative specifications, including matched samples and synthetic controls. By contrast, the impact on rental‑price growth is much less consistent. In the baseline DiD, a modest reduction in price growth appears, but once the pre‑trend imbalance is accounted for, the effect either disappears or loses statistical significance. Consequently, the evidence suggests that the 2024 Catalan rent‑control policy may have curtailed rental‑housing supply without delivering a clear, lasting suppression of rent inflation.

The paper situates its findings within a broader literature on rent control in the United States, Germany, France, and earlier Catalan reforms. Prior studies have documented short‑run price deceleration accompanied by supply constraints, with effects often fading after the first year. The current evidence aligns with this pattern, highlighting the difficulty of achieving durable price stabilization while preserving housing stock.

Limitations are explicitly acknowledged: (1) reliance on average rent rather than unit‑level rents, (2) substantial and potentially systematic missing data in the control group, (3) exclusion of the second wave of treated municipalities, limiting long‑run analysis, and (4) violation of the parallel‑trend assumption that undermines causal interpretation of the simple DiD estimates. The author recommends future work that exploits unit‑level rent data, applies a regression‑discontinuity design around the 30 % rent‑to‑income threshold, and incorporates longer post‑policy periods to better isolate dynamic effects.

In sum, the study contributes novel evidence from a new institutional setting, showing that Catalonia’s 2024 rent‑control law produced a measurable contraction in rental‑housing supply while delivering ambiguous effects on rent growth. Policymakers should weigh the trade‑off between price caps and potential reductions in housing availability, and further research is needed to clarify the long‑term welfare implications of such regulations.