The Damage Inflicted by French Rent Controls Between 1914 and 1948

Most economists believe that strict rent controls deter the production and maintenance of rental housing. In a Métropolitiques essay, Loïc Bonneval challenged this consensus. Bonneval claimed that France’s severe interwar rent controls had little effect on the profitability of real estate investments. Bonneval based his analysis on a valuable study that he and François Robert made of the archival records of a property management firm in Lyon. Although we admire many aspects of Bonneval’s study, we challenge his economic analysis. Bonneval wrongly focused on the returns that would be available to a buyer of a rent controlled apartment building, not those available to the building’s owner or a prospective builder. As Bonneval and Robert’s own study shows, the real value of apartment buildings in Paris and Lyon fell by 90% between 1913 and 1948. Economists do not need to rethink their opposition to strict rent controls