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Information Asymmetry, Regulations and Equilibrium Outcomes: Theory and Evidence from the Housing Rental Market

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  • Brent W. Ambrose
  • Moussa Diop

Abstract

We explore the role of information asymmetry and regulations on equilibrium outcomes in rental markets to show that while landlords price the cost of regulations into rent, they also invest in tenant screening to alleviate information asymmetry, thus restricting access to rental housing. We are the first to document this additional tenant screening in response to regulations.

Suggested Citation

  • Brent W. Ambrose & Moussa Diop, 2021. "Information Asymmetry, Regulations and Equilibrium Outcomes: Theory and Evidence from the Housing Rental Market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(S1), pages 74-110, March.
    • Handle: RePEc:bla:reesec:v:49:y:2021:i:s1:p:74-110
    DOI: 10.1111/1540-6229.12262
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    References listed on IDEAS

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    1. Randal Verbrugge & Alan Dorfman & William Johnson & Fred Marsh III & Robert Poole & Owen Shoemaker, 2017. "Determinants of Differential Rent Changes: Mean Reversion versus the Usual Suspects," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 45(3), pages 591-627, July.
    2. Eli Beracha & Ben T Gilbert & Tyler Kjorstad & Kiplan Womack, 2018. "On the Relation between Local Amenities and House Price Dynamics," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 46(3), pages 612-654, September.
    3. Philippe Bracke, 2015. "House Prices and Rents: Microevidence from a Matched Data Set in Central London," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 43(2), pages 403-431, June.
    4. Glaeser, Edward L & Gyourko, Joseph & Saks, Raven, 2005. "Why Is Manhattan So Expensive? Regulation and the Rise in Housing Prices," Journal of Law and Economics, University of Chicago Press, vol. 48(2), pages 331-369, October.
    5. Henderson, J Vernon & Ioannides, Yannis M, 1983. "A Model of Housing Tenure Choice," American Economic Review, American Economic Association, vol. 73(1), pages 98-113, March.
    6. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    7. Ambrose, Brent W. & Diop, Moussa, 2014. "Spillover effects of subprime mortgage originations: The effects of single-family mortgage credit expansion on the multifamily rental market," Journal of Urban Economics, Elsevier, vol. 81(C), pages 114-135.
    8. Jenny Schuetz, 2009. "No renters in my suburban backyard: Land use regulation and rental housing," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 28(2), pages 296-320.
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    Cited by:

    1. Agarwal, Sumit & Ambrose, Brent W. & Diop, Moussa, 2022. "Minimum wage increases and eviction risk," Journal of Urban Economics, Elsevier, vol. 129(C).
    2. Daniel Broxterman & Tingyu Zhou, 2023. "Information Frictions in Real Estate Markets: Recent Evidence and Issues," The Journal of Real Estate Finance and Economics, Springer, vol. 66(2), pages 203-298, February.

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