Efficiency rents: A new theory of the natural vacancy rate for rental housing
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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- Arthur A. Eubank & C. R. Sirmans, 1979. "The Price Adjustment Mechanism for Rental Housing in the United States," The Quarterly Journal of Economics, Oxford University Press, vol. 93(1), pages 163-168.
- Gabriel, Stuart A. & Nothaft, Frank E., 2001.
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Journal of Urban Economics,
Elsevier, vol. 49(1), pages 121-149, January.
- Stuart A. Gabriel & Frank E. Nothaft, 1999. "Rental Housing Markets, the Incidence and Duration of Vacancy, and the Natural Vacancy Rate," Working Paper 8668, USC Lusk Center for Real Estate.
- 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.
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- 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.
- Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
- 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 779-786, September.
- Hirsch, Werner Z, 1981. "Habitability Laws and the Welfare of Indigent Tenants," The Review of Economics and Statistics, MIT Press, vol. 63(2), pages 263-274, May.
- 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 1270-1292, December.
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