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Screening Under Regulation: How Landlords Adapt Deposits to Perceived Risk in Rental Housing Markets

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  • Jon Charterina Abando

    (Euskal Herriko Unibertsitatea (EHU))

Abstract

This paper analyses the determinants of security deposits in residential rental contracts as a proxy for landlords’ perceived adverse selection risk. Using administrative data from the Basque Autonomous Community, we estimate General Linear Models with robust errors and interaction terms capturing tenant and landlord characteristics, demographic composition, market size, and regulatory change. We pay particular attention to the regulatory change introduced by Royal Decree-Law 7/2019, which strengthened tenant protection and capped deposits. The results show that deposits are not uniformly related to demographic or contractual attributes but vary in a context-dependent manner shaped by market conditions, institutional actors, and regulation. Rather than reflecting objective risk or discrimination, deposits operate as adaptive screening devices under asymmetric information. The findings point to the limits of uniform regulation and the need for context-sensitive housing policies.

Suggested Citation

  • Jon Charterina Abando, 2026. "Screening Under Regulation: How Landlords Adapt Deposits to Perceived Risk in Rental Housing Markets," EKONOMIAZ. Revista vasca de Economía, Gobierno Vasco / Eusko Jaurlaritza / Basque Government, vol. 109(01), pages 208-231.
    • Handle: RePEc:ekz:ekonoz:2026108
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    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law

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