Judge for yourself? The impact of controls on the rental market in interwar New York

This paper examines the impact of early 20th-century rent control laws in New York City, exploiting judicial discretion as a source of variation. The 1920 regulations empowered municipal court judges to decide whether rent increases were “reasonable”, with rulings shaped by partisan affiliation. We assemble a new dataset of over 20,000 rental listings from the New York Times (1918–1930) and more than 7000 archival building permits, linked to records on 125 district judges. Using a Regression Discontinuity Design at municipal court district boundaries, we find that market rents rose by nearly 10 percent when crossing from Democrat- to Republican-controlled districts after rent control. We examine supply effects using a difference-in-differences design. We show that judicially enforced rent control substantially reduced residential investment: total residential investment was about 76 percent higher in landlord-friendly districts during the rent-control period. Together, these findings demonstrate how judicial discretion shaped both prices and investment, leading to systematic differences in profits and construction activity across districts, which likely shaped the medium-run build environment.