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The Residency Discount for Rents in Germany and the Tenancy Law Reform Act 2001: Evidence from Quantile Regressions

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  • Bernd Fitzenberger
  • Benjamin Fuchs

Abstract

Most countries show a residency discount in rents for sitting tenants. In the wake of strong rent increases and housing shortages, Germany implemented a reform in 2001 to curtail rent increases. Based on linked housing-tenant data for Germany, this paper estimates panel OLS and quantile regressions of rents within tenancies. The results show that rents deflated by the CPI increase strongly from 1984 until the reform in 2001, and there is a reversal in the trend afterwards. Before the reform, there is a significant residence discount which decreases in absolute value with tenure. The reform reduces rents, in particular for expensive apartments and for new leases. There is no residency discount after the reform.

Suggested Citation

  • Bernd Fitzenberger & Benjamin Fuchs, 2016. "The Residency Discount for Rents in Germany and the Tenancy Law Reform Act 2001: Evidence from Quantile Regressions," SOEPpapers on Multidisciplinary Panel Data Research 822, DIW Berlin, The German Socio-Economic Panel (SOEP).
    • Handle: RePEc:diw:diwsop:diw_sp822
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    3. Grossmann, Volker & Schäfer, Andreas & Steger, Thomas & Fuchs, Benjamin, 2017. "Reversal of migration flows: A fresh look at the German reunification," Journal of International Economics, Elsevier, vol. 109(C), pages 1-15.
    4. Mateusz Tomal & Marco Helbich, 2023. "A spatial autoregressive geographically weighted quantile regression to explore housing rent determinants in Amsterdam and Warsaw," Environment and Planning B, , vol. 50(3), pages 579-599, March.
    5. Thomschke, Lorenz, 2016. "Distributional price effects of rent controls in Berlin: When expectation meets reality," CAWM Discussion Papers 89, University of Münster, Münster Center for Economic Policy (MEP).
    6. Umut Unal & Bernd Hayo & Isil Erol, 2022. "The Effect of Immigration on the German Housing Market," MAGKS Papers on Economics 202238, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    7. O’Toole, Conor & Martinez-Cillero, Maria & Ahrens, Achim, 2021. "Price regulation, inflation, and nominal rigidity in housing rents," Journal of Housing Economics, Elsevier, vol. 52(C).
    8. Gohl, Niklas, 2019. "House prices and spatial mobility: Lock-in effects on the German rental market," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203557, Verein für Socialpolitik / German Economic Association.
    9. Konstantin A. Kholodilin, 2022. "Rent Control Effects through the Lens of Empirical Research: An almost Complete Review of the Literature," Discussion Papers of DIW Berlin 2026, DIW Berlin, German Institute for Economic Research.
    10. Lea Eilers & Alfredo R. Paloyo & Colin Vance, 2021. "Rental prices in Germany: A comparison between migrants and natives," Scottish Journal of Political Economy, Scottish Economic Society, vol. 68(4), pages 434-466, September.
    11. Mehboob Ali & Göran Kauermann, 2021. "A split questionnaire survey design in the context of statistical matching," Statistical Methods & Applications, Springer;Società Italiana di Statistica, vol. 30(4), pages 1219-1236, October.
    12. Galina Besstremyannaya & Sergei Golovan, 2019. "Reconsideration of a simple approach to quantile regression for panel data: a comment on the Canay (2011) fixed effects estimator," Working Papers w0249, Center for Economic and Financial Research (CEFIR).
    13. Galina Besstremyannaya & Sergei Golovan, 2019. "Reconsideration of a simple approach to quantile regression for panel data: a comment on the Canay (2011) fixed effects estimator," Working Papers w0249, New Economic School (NES).

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    More about this item

    Keywords

    Linked housing-tenant data; rent regression; length of residency discount; rent control; quantile regression;
    All these keywords.

    JEL classification:

    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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