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Article
Publication date: 1 January 1992

Geoffrey Reed

As deregulation takes place in the UK, rent tribunals areconfronted with the problem of setting a “market rent” forpreviously controlled property. A simple partial…

Abstract

As deregulation takes place in the UK, rent tribunals are confronted with the problem of setting a “market rent” for previously controlled property. A simple partial equilibrium model of a sector of the rented accommodation market is used to examine the question of setting a “market rent” in the controlledrent subsector. It is shown that setting the controlled rent equal to the rent prevailing in the uncontrolled part of the market is sub‐optimal, and a simple formula is suggested which will give a better estimate of the true free market rent.

Details

Journal of Economic Studies, vol. 19 no. 1
Type: Research Article
ISSN: 0144-3585

Keywords

Article
Publication date: 8 February 2008

Beate Klingenberg and Roger J. Brown

The purpose of this paper is to show how an optimization model previously published by the authors is employed to study the effects of rent control on income optimization…

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Abstract

Purpose

The purpose of this paper is to show how an optimization model previously published by the authors is employed to study the effects of rent control on income optimization for the owner and the manager, as well as on the principal‐agent relationship. The model explains effects on management, maintenance and housing quality observed under rent control.

Design/methodology/approach

The optimization model is developed by applying a transaction cost framework to the context of income structures in investment properties and their management. Rent control is introduced into the model as a rent maximum.

Findings

Under rent control, the manager is forced to optimize income solely through cost control, without motivation to provide above minimum services. The owner is unable to optimize income. Income and funds available for management and maintenance are reduced by costs uncontrollable by the owner. Consequently, management and maintenance are reduced, if not eliminated, resulting in deterioration of the housing stock, notwithstanding minimum habitability standards imposed by regulators. This dilemma argues against dropping management entirely and interferes with the owner's quest to find the right incentive structure for the agent.

Research limitations/implications

Rent control is modeled as a cap on rents. Many rent control policies employ a maximum in rent increase instead, with the maximum often linked to inflation. As the results of the model are in line with real‐world observations, this simplification seems to be non‐critical.

Practical implications

Rent control was implemented with the intent to provide affordable housing to the less fortunate in society. Economic and social effects of rent control have since been heatedly discussed, in the public arena and in academia. This paper supports the view that rent control has unintended, negative consequences not only for the property owner, but also for the property manager (who is at the brink of elimination) and for the tenant (as housing quality deteriorates). This paper therefore encourages a renewed discussion and review of rent control policies.

Originality/value

The paper expands existing literature by analyzing the effects of rent control on property management. By using an optimization model, theory‐based results are provided that supplements real‐word observations, which is interesting for both academics and practitioners. Furthermore, the applicability of the previously developed optimization model is strengthened.

Details

Property Management, vol. 26 no. 1
Type: Research Article
ISSN: 0263-7472

Keywords

Article
Publication date: 31 May 2011

Mats Wilhelmsson, Roland Andersson and Kerstin Klingborg

The purpose of this paper is to analyze the effects of Swedish rent controls on observed vacancy rates for rental housing.

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Abstract

Purpose

The purpose of this paper is to analyze the effects of Swedish rent controls on observed vacancy rates for rental housing.

Design/methodology/approach

Housing vacancy rates are unevenly distributed among Swedish municipalities. In large expansive municipalities, such as Malmö, Göteborg and Stockholm, vacancy rates are very low, while in declining or smaller municipalities such as those in the northern and interior parts of Sweden, vacancy rates are considerably higher. This implies welfare losses not only in growing municipalities with queues for rental apartments but also in municipalities that are shrinking since the controlled rents there are higher than market rents and cause higher vacancy rates than with market rents. The authors estimate the influences of various determining factors, such as population growth, population size, rent levels, construction, demolition and market orientation of rents, on the observed vacancy rates.

Findings

The authors find that that these factors affect the vacancy rates differently depending on whether a municipality is large or small, growing or shrinking. Population growth, in percent per year, plays an important role in explaining the observed vacancy rates in declining regions.

Research limitations/implications

A research task that remains to be done is to calculate the welfare losses due to rent higher than the market rent for municipalities in contraction.

Practical implications

To reduce the welfare losses of rent control, both in expanding and contracting municipalities, economists' straightforward recommendation to deregulate the rent control should, in principle, be carried out.

Originality/value

In many countries, rent control regulations are limited to cities, such as New York City. The paper shows that the Swedish rent control system however, applies nationwide, except for annual rent increases, which are set locally through negotiation.

Details

International Journal of Housing Markets and Analysis, vol. 4 no. 2
Type: Research Article
ISSN: 1753-8270

Keywords

Article
Publication date: 24 February 2020

Jan Philip Weber and Gabriel Lee

The purpose of this paper is twofold: first, the authors construct a country-specific time-varying private rental regulation index for 18 developed economies starting from…

Abstract

Purpose

The purpose of this paper is twofold: first, the authors construct a country-specific time-varying private rental regulation index for 18 developed economies starting from 1973 to 2014. Second, the authors analyze the effects of their index on the housing rental markets across 18 countries and states.

Design/methodology/approach

The authors’ index not only covers 18 developed economies over 42 years but also combines both tenure security and rent laws. The authors’ empirical framework is that of panel regressions with time and country fixed effects.

Findings

The authors’ index sheds further insights on the extent to which rent and tenure security laws have converged over the past 40 years for each economy. Moreover, the authors show three empirical results. First, stringent rent control regimes do lead to lower real rent growth rates than regimes with free rents. Second, soft rent control regimes with time-limited tenure security and minimum duration periods, however, may cause higher rent growth rates than free rent regimes. Third, rent-free regimes do not show significant high real rent appreciation rates.

Originality/value

The authors’ rental regulation index is the first time-varying index that covers more than 18 economies over 40 years.

Details

International Journal of Housing Markets and Analysis, vol. 13 no. 4
Type: Research Article
ISSN: 1753-8270

Keywords

Article
Publication date: 1 March 1990

Gil Shidlo

This article sets out to explore whether right wing parties have made a difference to the way housing policy was formulated in the UK and Israel. Both countries provide…

Abstract

This article sets out to explore whether right wing parties have made a difference to the way housing policy was formulated in the UK and Israel. Both countries provide similar examples of national approaches to housing policy. We shall review two policy developments, rent control and improving housing conditions in the inner cities.

Details

International Journal of Sociology and Social Policy, vol. 10 no. 3
Type: Research Article
ISSN: 0144-333X

Article
Publication date: 1 February 1987

Martin Ricketts

Recent months have seen increasing public concern with the state of the housing stock in Britain. Symptoms of the malaise include physical decay, empty property…

Abstract

Recent months have seen increasing public concern with the state of the housing stock in Britain. Symptoms of the malaise include physical decay, empty property, homelessness, geographical immobility of households, overcrowding, and large numbers of people in bed and breakfast accommodation. In the search for causes and cures, attention has been directed at the structure of tenures in the UK and in particular at the inefficient operation of the rented sector of the housing market. The UK is characterised by a relatively large municipally‐controlled rented sector, and a relatively small sector of private lettings, compared with many other advanced countries. Neither the public nor the private sector of the rented housing market seems at present capable of meeting the demand placed upon it. In particular, public policy over 70 years has systematically undermined the privately rented sector. From housing around 90 per cent of households in 1915, the sector has declined to a mere ten per cent in 1985. Two forces explain this extra‐ordinary collapse of private renting. Firstly, as more and more people have become taxpayers during the course of the 20th century, the advantages of receiving lightly taxed income ‘in kind’ by investing in owner‐occupied housing have become increasingly pronounced. Landlords pay tax on the income (including capital gains) derived from housing, owner‐occupiers do not. Secondly, some form of rent control or regulation has been in force for most privately‐rented property continuously since the early years of the First World War. The restriction of prices below market clearing levels in the private rented sector has inevitably discouraged supply, reduced repair and maintenance expenditures, hastened sales of hitherto rented property to owner‐occupiers, gravely impeded geographical mobility of households, distorted the allocation of available housing space, and exacerbated housing shortages (homelessness). As a long term component of social policy, rent control has almost nothing to commend it. Its predicted consequences can all be derived from the simplest application of microeconomic analysis, and many elementary textbooks use rent control as an outstanding example of the effects on markets of intervention in the process of price formation. However, in spite of the widely perceived disadvantages of rent control, it is a policy which it is very difficult to reverse. The purpose of this paper is to discuss briefly the main features of a scheme which was recently advocated by the present writer in a paper published by the Centre for Policy Studies.

Details

Property Management, vol. 5 no. 2
Type: Research Article
ISSN: 0263-7472

Article
Publication date: 8 February 2011

Johan Conijn and Frans Schilder

This paper aims to present a model that analyses the value gap, the difference between vacant possession value and tenanted investment value, for the houses of Dutch…

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Abstract

Purpose

This paper aims to present a model that analyses the value gap, the difference between vacant possession value and tenanted investment value, for the houses of Dutch housing associations. The paper also aims to explore why the value gap is a structural phenomenon in The Netherlands and why it is an important factor contributing to the malfunctioning of the housing market. This gives an interesting expansion of the value gap theory.

Design/methodology/approach

By using the well‐known concept of user costs and using market equilibrium as a reference, the model quantifies the influence of six factors that cause the value gap. This is done for The Netherlands in total and for each of the 452 housing associations separately.

Findings

The value gap between the owner‐occupied and the rental sector is immense. This is especially the case with the rented houses owned by the housing associations, constituting one‐third of the total housing stock. The vacant possession value of these houses is on average €151,000; the reported tenanted investment value is no more than €33,000. Important factors that are responsible for this gap are, on the one hand, the fiscal subsidies in the owner‐occupied sector and, on the other hand, rent control and the policy of the housing associations characterised by a low rent level and high maintenance and management costs.

Originality/value

This is the first paper that analyses and quantifies the factors contributing to the value lost by Dutch housing associations' operations.

Details

Property Management, vol. 29 no. 1
Type: Research Article
ISSN: 0263-7472

Keywords

Abstract

“Economics is a Serious Subject.” Edwin Cannan.

Details

Wisconsin, Labor, Income, and Institutions: Contributions from Commons and Bronfenbrenner
Type: Book
ISBN: 978-1-78052-010-0

Article
Publication date: 2 July 2021

Wenjue Zhu, Krishna P. Paudel, Sean Inoue and Biliang Luo

The purpose is to understand why contract instability occurs when small landowners lease their land to large landholders.

Abstract

Purpose

The purpose is to understand why contract instability occurs when small landowners lease their land to large landholders.

Design/methodology/approach

The authors develop a contract theoretical model to understand the stability problem in the farmland lease contract in China, where most landowners are small landholders.

Findings

Results from the doubly robust estimation method used on randomly selected interview data from 552 households in nine provinces of China indicate that contract instability can arise endogenously when large landholders sign a contract. The authors conclude that a suitable rent control regime or contract enforcement may be necessary to promote a large-scale farmland transfer in China.

Originality/value

The authors develop a contract theoretical model and apply it to the land rental market in China. Data used are original and collected from farmers located in nine provinces of China.

Details

China Agricultural Economic Review, vol. 13 no. 4
Type: Research Article
ISSN: 1756-137X

Keywords

Article
Publication date: 1 July 2014

Jeremy Gabe and Michael Rehm

– Using a unique data set, the purpose of this paper is to test the hypothesis that tenants pay increased accommodation costs for space in energy efficient office property.

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Abstract

Purpose

Using a unique data set, the purpose of this paper is to test the hypothesis that tenants pay increased accommodation costs for space in energy efficient office property.

Design/methodology/approach

The authors obtain lease contracts for office space in central Sydney, Australia. Empirical data on annual gross face rent and contract terms from each lease are combined with building characteristics and measured energy performance at the time of lease. Hedonic regression isolates the effect of energy performance on gross face rent.

Findings

No significant price differentials emerged as a function of energy performance, leading to a conclusion that tenants are not willing to pay for energy efficiency. Six factors – tenancy floor level, submarket location, proximity to transit, market fixed effects, building quality specification and, surprisingly, outgoings liability – consistently explain over 85 per cent of gross face rent prices in Sydney.

Research limitations/implications

Rent premiums from an asset owner's perspective could emerge as a result of occupancy premiums, market timing or agent bias combined with statistically insignificant rental price differentials.

Practical implications

Tenants are likely indifferent to energy costs because the paper demonstrates that energy efficiency lacks financial salience and legal obligation in Sydney. This means that split incentives between owner and tenant are not a substantial barrier to energy efficiency investment in this market.

Originality/value

This study is the first to thoroughly examine energy efficiency rent price premiums at the tenancy scale in response to disclosure of measured performance. It also presents evidence against the common assumption that rent premiums at the asset scale reflect tenant willingness to pay for energy efficiency.

Details

Journal of Property Investment & Finance, vol. 32 no. 4
Type: Research Article
ISSN: 1463-578X

Keywords

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