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Leases over real property

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  • Clarke, Dylan R.

Abstract

This paper develops a model in which housing incurs a property damage for which the tenant must sue in order to be made whole. The model is analyzed under both market rents and rent control regimes, as well as for tenants with limited wealth, bilateral (tenant) investment, coinsurance, and rent abatement. The model facilitates the evaluation of several policies, such as rent control, landlord–tenant laws, income redistribution, tenant’s insurance, and rent abatement. The model makes several predictions which are consistent with empirical findings in housing economics, such as why the poor occupy housing of worse condition and how laws shifting liability onto the landlord increase the quality of housing for poor tenants as well as increase rent prices. It also nests classic hypotheses, such as the Calabresi’s efficiency of strict liability rules and the least cost avoider, in addition to clarifications on Friedman’s prediction that rent control decreases investment.

Suggested Citation

  • Clarke, Dylan R., 2025. "Leases over real property," Regional Science and Urban Economics, Elsevier, vol. 111(C).
    • Handle: RePEc:eee:regeco:v:111:y:2025:i:c:s0166046225000043
    DOI: 10.1016/j.regsciurbeco.2025.104087
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    References listed on IDEAS

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    1. 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.
    2. Kaplow, Louis & Shavell, Steven, 1994. "Why the Legal System Is Less Efficient Than the Income Tax in Redistributing Income," The Journal of Legal Studies, University of Chicago Press, vol. 23(2), pages 667-681, June.
    3. Rebecca Diamond & Tim McQuade & Franklin Qian, 2019. "The Effects of Rent Control Expansion on Tenants, Landlords, and Inequality: Evidence from San Francisco," American Economic Review, American Economic Association, vol. 109(9), pages 3365-3394, September.
    4. Sims, David P., 2007. "Out of control: What can we learn from the end of Massachusetts rent control?," Journal of Urban Economics, Elsevier, vol. 61(1), pages 129-151, January.
    5. Werner Z. Hirsch & Stephen Margolis, 1977. "Habitability Laws and Low-Cost Rental Housing," NBER Chapters, in: Residential Location and Urban Housing Markets, pages 181-228, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Housing economics; Law & economics; Landlord–tenant law; Poverty law; Property; Contracts; Torts; Litigation;
    All these keywords.

    JEL classification:

    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
    • K25 - Law and Economics - - Regulation and Business Law - - - Real Estate Law
    • K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • L74 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Construction
    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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