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Efficiency rents: A new theory of the natural vacancy rate for rental housing

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  • Miceli, Thomas J.
  • Sirmans, C.F.
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    Abstract

    This paper adapts the theory of efficiency wages to explain the natural vacancy rate in rental housing markets. A positive vacancy rate provides landlords an incentive to invest in maintenance because if they fail to do so, some tenants will leave and the unit will sit vacant for a finite period of time. The resulting foregone rent will penalize landlords’ failure to maintain. Habitability laws, which have been enacted by states since the 1960s, provide a non-market penalty which lessens the need for market enforcement. Variation in these laws by state offers an opportunity to test the theory.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Housing Economics.

    Volume (Year): 22 (2013)
    Issue (Month): 1 ()
    Pages: 20-24

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    Handle: RePEc:eee:jhouse:v:22:y:2013:i:1:p:20-24

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    Web page: http://www.elsevier.com/locate/inca/622881

    Related research

    Keywords: Efficiency rents; Natural vacancy rate; Rental housing;

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    References

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    1. Rosen, Kenneth T & Smith, Lawrence B, 1983. "The Price-Adjustment Process for Rental Housing and the Natural Vacancy Rate," American Economic Review, American Economic Association, vol. 73(4), pages 779-86, September.
    2. Colin Read, 1991. "A Price Dispersion Equilibrium in a Spatially Differentiated Housing Market with Search Costs," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 19(4), pages 532-547.
    3. Gabriel, Stuart A. & Nothaft, Frank E., 2001. "Rental Housing Markets, the Incidence and Duration of Vacancy, and the Natural Vacancy Rate," Journal of Urban Economics, Elsevier, vol. 49(1), pages 121-149, January.
    4. Guasch, J. Luis & Marshall, Robert C., 1985. "An analysis of vacancy patterns in the rental housing market," Journal of Urban Economics, Elsevier, vol. 17(2), pages 208-229, March.
    5. Wheaton, William C, 1990. "Vacancy, Search, and Prices in a Housing Market Matching Model," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1270-92, December.
    6. 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.
    7. Eubank, Arthur A, Jr & Sirmans, C F, 1979. "The Price Adjustment Mechanism for Rental Housing in the United States," The Quarterly Journal of Economics, MIT Press, vol. 93(1), pages 163-68, February.
    8. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
    9. Hirsch, Werner Z, 1981. "Habitability Laws and the Welfare of Indigent Tenants," The Review of Economics and Statistics, MIT Press, vol. 63(2), pages 263-74, May.
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    Cited by:
    1. Vanessa Gapriotti Nadalin, 2014. "Residential Vacancy in City Center: The Case of São Paulo," Discussion Papers 1987a, Instituto de Pesquisa Econômica Aplicada - IPEA.

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