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The Home Front: Rent control and the rapid wartime increase in home ownership

Oct 2013
Working Paper
13-005
By  Daniel Fetter
The US home ownership rate rose by 10 percentage points between 1940 and 1945, about half the size of the net change over the 20th century, despite severe restrictions on construction during World War II. I present evidence that wartime rent control which covered over 80 percent of the 1940 U.S. rental housing stock played an important role in this shift, as suggested by Friedman and Stigler (1946). The empirical test exploits features of the central authority's method of imposing rent control, which generated variation in the size of rent reductions for cities that had seen similar increases in rents prior to control. Greater rent reductions were associated with greater increases in home ownership over the rst half of the 1940's. This relationship does not appear to be driven by dierential trends in housing demand or other unobserved factors potentially correlated with variation in rent reductions. The estimates suggest that rent control may explain 65 percent of the urban increase in home ownership over the rst half of the 1940's.