Does Rent Regulation Affect Tenant Unemployment? Evidence from New York City

We study the effect of rent stabilization in NYC on tenant unemployment from 2002 to 2017. We show rent stabilization increases tenants’ unemployment by six percentage points, more than double the average unemployment rate during the study period. Moreover, the effect is concentrated in traditionally privileged groups. We address the potential policy’s endogeneity with an instrumental variable that captures neighborhood-level rent-stabilized units’ relative vacancy when the tenant moves in. We develop a job-search model with rent stabilization that rationalizes the disincentive mechanism behind this effect. We confirm empirically heterogeneous effects across groups of workers in the directions suggested by the model