Inefficiencies of Rent Control and Mortgage Interest Rate Subsidies in Housing Policy

This paper analyzes the inefficiencies of rent control policies and mortgage interest rate subsidies in housing markets. Study mainly argues that while these policies aim to improve short term affordability, they often distort market dynamics by increasing demand without addressing supply constraints. Rent controls reduce housing quality, discourage new housing supply and raise rents in uncontrolled segments. Moreover, interest rate subsidies inflate housing prices and household debt while is not effective to provide affordibility for low income families. Drawing on international evidence and recent monetary tightening in Europe, the paper shows that housing markets are highly sensitive to credit conditions. It concludes that sustainable housing outcomes require long term, supply oriented and locally tailored policy interventions rather than broad demand side subsidies

Housing Policies interest rate subsidies and rent control.pdf

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