Welfare effects of rent control - A comparison of redistributive policies

In this paper we compare the welfare effects of rent control, linking properties' rental prices to purchase prices, to the most standard redistribution policy, an increase in tax financed transfers to the less wealthy. We calibrate a general equilibrium model with heterogeneous agents, which differ with respect to their time preference, to fit key characteristics of the German economy. This way, we show that the introduction of rent control Pareto dominates tax financed transfer payments in steady state.