What is the likely result of rent control in Berlin? What predictions does economics make about the likely result of this policy in Berlin of capping rent prices.


  Berlin is freezing the rents of 1.5 million apartments for the next five years starting this Sunday in a controversial move to control the exploding costs that have forced many to move outside Germany's capital city.
Rent control will over time decrease the supply of housing while increasing demand causing a housing shortage. Moreover, there are also studies that show that under rent control there are not just shortages of houses but also misallocation, that is the houses are no longer allocated to people who have highest utility/consumer surplus from having them (Glaeser and Luttmer, 2003).

A recent literature review on rent control concluded (Jerkins, 2009):


  I find that the preponderance of the literature points toward the conclusion that rent control introduces inefficiencies in housing markets. Moreover, the literature on the whole does not sustain any plausible redemption in terms of redistribution.


Furthermore, the IGM forum, a platform that surveys the top policy economists, shows that virtually all of them think that rent control (at least as applied in US) had a negative effect on availability and quality of housing (see here).

However, note an important caveat is that as any policy also rent control is not always homogeneously applied. I saw some studies showing net positive redistributional effects of rent control but it’s only small minority of all studies and usually the positive results come from rent controls that were applied only to special subsection of housing market for example government owned social housing. Those studies to my best knowledge do not really apply to the Berlin case, which is going more or less the similar route as San Francisco or New York where the effects are shown to be significantly negative.