Speculative housing markets and rent control: insights from nonlinear economic dynamics

Abstract We propose a novel housing market model to explore the effectiveness of rent control. Our reveals that expectation formation and learning behavior boundedly rational homebuyers, switching between extrapolative regressive rules subject their past forecasting accuracy, may create endogenous dynamics. show policymakers use control reduce level, although such policies have undesirable effects on house price stock. However, we are also able prove well-designed help stabilize dynamics, even without creating distortions.