Article: article from journal or magazin.
A Model of Regulation in the Rental Housing Market
Regional Science and Urban Economics
This paper develops a theoretical model to study the effects of regulation on the rental housing market. Our model emphasises the following specific features of the housing market: product heterogeneity and search costs play a central role, switching (moving) costs are substantial, and the possibilities to price discriminate are important. We show that with short-term rental contracts rents will increase at the time of renegotiation as a result of the ?hold-up? problem. Tenancy rent control which limits the owners? possibilities to increase rents for a certain number of years leads to lower equilibrium rents and higher social welfare. Our model strongly suggests that a policy which consists of indexing rents may be socially preferable to short-term contracts.
Rental Housing, Monopolistic competition, Regulation, Search, Hold-up
Web of science
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